10-point HR and Payroll transformation checklist for M&A and divestment scenarios

In the first blog in this series we offered some Expert Tips for Ensuring Payroll Continuity During Times of Major Business Change. In this blog we dive deeper. We offer advice on how to manage and maintain payroll during two specific scenarios. Scenario one: an M&A. Scenario two: a business divestment.

Before we go into detail, take a moment to review this checklist to get you thinking.

Your 10-point HR transformation check list for M&A and divestment scenarios

  • Set-up a working party to manage the change, one that’s part of a company wide change task force
  • Consider at an early stage if you have the IT skills in-house to bring together a range of diverse systems effectively (in the case of divestment, separate) or should you partner with a specialist firm
  • Understand what HR resources you have available and plug gaps with consultants. You need people dedicated to the project. This will save a great deal of time, money and worry from the outset
  • Set-up temporary service agreements with parent companies / service providers where time is needed to bridge gaps
  • Audit the current HR infrastructure including platforms and systems in all locations. Some will have modern ERP systems others will be running HR on spreadsheets
  • Map country-specific HR processes, employee contracts, terms of employment, legislative requirements, etc., so these can be change-managed effectively
  • Prioritize payroll. Payroll systems that work without a hitch are vital for employee engagement and to keep you compliant
  • Ensure HR and payroll teams are well trained in using the new systems
  • Establish a change management strategy to include effective employee communication, training and continued engagement post event
  • Build in agility for the future

What we know

Many of the organizations we work with are expanding through merger or acquisition or they’re divesting from an established business to become a standalone operation. Both groups are strategically different, with the immediacy of the challenge far greater in scenario two.

In the case of a business divestment, the now standalone business needs to very quickly finance and build an entire HR and payroll infrastructure. This is far from a simple task and comes at a time when there are very many more resource pressures on the business.

The role we play here is to get the HR and payroll systems designed, built and fully working within the stipulations of the separation agreement. Let’s take a closer look at the two different groups.

Scenario One : Organizations with increasingly complex HR & payroll infrastructures as the result of M&A activities

These organizations are often entering new markets, extending global reach or coming together to fight off growing competition. Usually they’re established businesses, each with their own HR, payroll and data teams and processes. It is common for there to be reluctance from all sides to relinquish HR team or systems. A political discussion.

The urgency, as previously mentioned, is less than with a divestment because the functionality for each business remains. However, it’s the complexity and lack of workforce visibility that starts to impact business potential that is the concern.

For us, integrating the processes for these merged businesses into a single standardized global process is relatively straight forward. We say this as experts with many years’ experience. It’s not something we recommend to clients to manage as a one-off project!

To get results fast for clients we’ve brought together years of experience to develop fast track deployment methodologies. These combine years of best practice with pre-configured templates to create solutions such as NGA cleaHRsky and the newly launched NGA FastTrack HR & Payroll.  Both of these will be up and running in less than three months.

Live project examples

Even understanding what systems exist and knowing where and how data is stored can be a major challenge. It’s not atypical for there to be up to 200 HR and payroll systems within a merged business and this was the case with Thyssenkrupp when we started working with the teams there several years ago.

The Thyssenkrupp project is a great example of the complexity that comes when there have been hundreds of M&As over many years, but is is by no means unique. We’re currently on a major HR transformation journey together. Before we could go anywhere we first had to unravel decades of complexity.

The end destination will be streamlined global HR operations for 150,000 employees in all Thyssenkrupp locations outside of Germany. The standardized HR platform will support an estimated 150,000 people who currently have HR administered via several hundred independent HR systems. On top, we will manage the payroll for 50,000 employees in countries where the payroll complexity is high, via NGA HR’s BPO Payroll Services.

Single source data for performance and compliance

Single source data provides managers with workforce visibility previously not possible. Analyzed, this can be used to provide highly accurate source data for smart planning.

Without unifying the processes and integrating these with payroll and workforce systems, it would be impossible for businesses like ThyssenKrupp to achieve overriding objectives to act as a single integrated companies.

Another global company we’re working with initially faced a lot of internal resistance. Each merged business still operates very independently and so wanted to keep all business processes in silos.

However, the group HR director was concerned that there would be serious flight risks and future skills gaps if they could not fully understand their workforce dynamics. This lack of visibility also left them open to the dangers of compliance failures; the gender pay gap being one such example.

We were able to help them build a business case for workforce agility and compliance From this they came to realize the benefits of integrating multiple HR and payroll processes, not only to benefit from economies of scale, but also to nurture a more unified people culture across the group, one that could share best practices and together strive for united growth.

The major task for all organizations following an M&A is to merge the people processes. This challenge is mammoth, high-risk and essential. Very few have the skills in-house to manage this and so pull in the skills of partners such as NGA HR.

Scenario Two: Businesses requiring HR & Payroll infrastructure separation and rebuild

The flip side of M&A is divestment. This is happening more and more as business groups sell their less profitable companies to focus on growth areas. To demerge HR and payroll processes is far more challenging than standardizing and this is where NGA HR’s strengths lie.

Once the decision has been made to sell, the board of the parent company wants rid. This need for speed opens complicated people challenges. Refer to the earlier blog for the example from Philippe Manzanares, VP HRIS, Payroll, Reporting & Global HR Policies at Coty.

Standing on your own two feet

Where M&A is often a positive marriage of convenience, divestiture can have all the challenges of a messy divorce. Who and how will we look after the ‘children’ and how will we ‘finance’ them?

Suddenly alone from the parent company, the resources, facilities and budgets once available are diminished and strict timelines for the separation from core systems and assets, including HR and payroll systems, are set. People data needs to be separated and critical talent replaced. This might even mean the complete rebuilding of business functions including HR. How do you do this without the systems in place?

What hurts in the short-term works well in the longer-term

It’s from the planning stage that NGA HR goes into clients to work with the divestment teams. Step one is to establish what needs to be achieved to meet the overall objectives of the separation.

We’ve been through this in our own business several times and so fully understand the 360 challenges and emotions that go with this. No one likes to give up what works and they’re familiar with and no one likes to give anything away without a fight!

However, by being forced out of a legacy HR and payroll infrastructure you circumnavigate the need to build the business case for HR modernization. The solution delivered will be an agile, integrated HR infrastructure that can easily grow with your business. It’s simple to on-board new people, locations or businesses. And, it is future-proofed and highly secure.

You can liken the results of a re-established HR and payroll infrastructure to that of moving from a grand Victorian house at the time of divorce. With hindsight your realize that it was actually not that practical and would require a lot of maintenance and upgrading soon. In its place you now have a very smart, all mod-cons new-build. Even better, it already has double height foundations and is ready to extend as your new family grows.

How do we achieve future HR & payroll success?

We work with IT departments on three main areas; service delivery for employees and managers; centers of excellence; and business partners. Everything from planning, design and build through management, maintenance and full-service delivery. We provide one-off project support through to a life-time partnership to ensure you never need to worry about HR and payroll infrastructure processes working.

Many organizations, Uniper and AmRest spring to mind, are opting for integrated HR, payroll and service center processes, delivered as-a-service and profiting from our “fast track” approaches, as mentioned earlier. Here a pre-configured cloud HR infrastructure can be up and running in just 12 weeks and at a third of the cost of a bespoke design and build that will suit other business types.

With demergers, we work with the spin-off organization to provide HR service delivery mechanisms. Much of what we do here involves setting up an entirely new HR and payroll system and to help train internal teams. Like we do with our green-field clients, we’re able to do this very quickly using a global HR cloud platform, including flexible service models, as mentioned above.

Employee driven

The clients we work with are set-up for the future. They have HR processes in place that enable them to engage with and motivate their employees by making it easy for them to do their jobs and feel in control. This also helps to attract and retain the best talent.

If you would like to talk to NGA HR about your HR and payroll challenges, please do get in touch.