Human Resources/Organizational Development

HR/OD Integration Plan

Table of Contents

Ref.

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Document

1.

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High-Level Plan

a.

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Organization Comparative Analysis:What are the key similarities and differences between the 2 organizations? How do we operate currently?

b.

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Future State Recommendation:How will we operate in the future?

c.

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Day 1 Items: What actions do we need to take at close?

d.

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Risk Analysis: What are the risks associated with transition?

e.

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Early Wins: Are there any immediate actions we can take to demonstrate benefits and success?

f.

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Cost/Benefit Analysis: What are the costs and benefits associated with transition to the future state?

g.

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Outstanding Issues & Decisions: What open issues still need to be resolved in order to realize transition?

h.

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Communication Plan: What needs to be communicated (when & to whom) regarding the decisions that have been made?

Notes

This template is intended as a guide to help document current thinking on where the function, division, or area of the organization is headed. It is intended to focus more on the “FutureState,” or how we will operate after integration rather than provide detail on the step-by-step transition approach. Documenting the transition approach and sequencing the work required to reach the “FutureState: occurs in the next phase of planning. PLEASE SAVE THIS DOCUMENT USING A FILENAME CONVENTION THAT INCLUDES YOUR TEAM NAME AND A VERSION DATE. FOR EXAMPLE “SALES HIGH-LEVEL INTEGRATION PLAN 2-15-2020.doc.” This document is intended to facilitate team integration planning by providing a common format for teams to document and communicate directional recommendations for their areas. This material should be viewed as a guide. If additional information is needed to support recommendations, teams should add this information as appropriate.

Sections

Organization Comparative Analysis.Provides an opportunity to document the conversations that naturally occur between firms in any combination.

Future State Recommendation. Teams should document their major recommendations. These recommendations answer the question “What are the major changes that are being recommended to get to the desired future state?”

Day 1 Items. Provides a place for teams to document those items that must be changed on Day 1 (the first day after the transaction is closed) in their areas. Day 1 items may include items related to legal entities (contracts, bank accounts, etc.), policy and HR-related changes (expense policies, payroll, benefits), marketing and brand changes, and customer-related changes (billing, payment routing, etc.)

Risk Analysis. Provides an opportunity to document risks and mitigation plans associated with each recommendation.

Early Wins. Asks teams to think through rapid moves that can be made to support the ultimate objectives of the integration. It is important to identify these early successes, as they will help build momentum for the overall effort.

Cost/Benefit Analysis. Summarizes the financial and headcount impact of the various recommendations. The actual template for this section exists in MS Excel. Teams should fill out the MS Excel template and submit along with the word document containing the other sections of the plan. If desired, teams can cut and paste a picture of the MS Excel template into the word document. Within the cost/benefit template, the area/initiatives should be listed as shown in the example (these should match the recommendations outlined earlier in the plan). The expense numbers associated with each recommendation should include those areas that will be impacted and include salaries associated with headcount. The entries in the “Timing of Change” portion of the template should indicate incremental changes. Any additional notes regarding assumptions or sources for the savings can be included at the bottom of the template. Capital and one-time expenses should be captured in the “investment” section and reflect costs required to achieve synergies (e.g., severance, lease buyouts, move costs, etc.)

Outstanding Issues & Decisions.Allows teams to document those issues and decisions which are still open and either need further analysis or require a more global decision in order to clarify the path forward.

Page 1 of 20

Human Resources/Organizational Development

Organization Comparative Analysis

PROCESS / TOPIC AREA*

/

Company A

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Company B

/

DEGREE OF ALIGNMENT

NONE

/

LOW

/

MED

/

HIGH

1.HR Department Organizational Design

/ Organized by area of specialty which includes Compensation, Benefits, OD, Recruiting, Employee Relations, HRMS and HealthCenter / Organized by area of specialty similar to Co. A with exception of Health Center. /

X

2.Compensation & Titles

/

Program has 3 main components: market- based pay, short-term incentives, and long-term incentives (equity)

Managing Directors, Directors, Associate Directors, and Managers are the top four titles. Short term incentive targets and equity awards (for Directors and above) vary buy title. /

Program has 2 main components: market- based pay and short-term incentives

Recently implemented long-term incentives toless than 30 employees (approx)

Equity adjustments commonly made
Titles are not tied to incentives /

X

(titles
only) /

X

3.Retirement Benefits

/

Provides both a Cash Balance and a 401(k) Plan

/

Provides both a traditional Defined Benefit and 401(k) Plan

Offers retiree health, Medicare Part B supplement, and life insurance /

X

4.Health & Welfare Benefits

/ Standard benefits offered compared to market / Standard benefits offered compared to market /

X

5.Benefits Perquisites(officers only)

/ Parking, special equipment, and club memberships / Parking, special equipment, and club memberships
Provides medical supplemental benefits to key executives /

X

6.Performance Management

/

Utilize 10-point system, looks at goals and competencies, paper form only

/

Utilize 3-point system, looks at goals only, electronic form

/

X

7.Employee and Labor Relations

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Union employees – contract expires 2018

/

X

8.Recruiting

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Utilize PeopleSoft applicant tracking system and promote internal posting system

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Utilize Excel and Access database for applicant tracking and promotes internal posting system

/

X

9.HRMS

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PeopleSoft NO self-service applications utilized

/

PeopleSoft utilizes eBenefits, eProfile, ePay, and eCompensationManager.Desktop owns other eApplications

/

X

10.International Employee Programs and Policies

/

15 employees located in UK, primarily sales and business development focused

Benefits managed out of UK office /

5 employees located in UK, primarily sales and business development focused

Benefits managed out of UK office, with coordination from US team. Life insurance is solely managed out of US office. /

X

11.Succession Management

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Formal program

/

No program

/

X

12.Leadership Development

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Formal program

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No program

/

X

13.Retention programs

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Draft policy being reviewed

/

Formal policy adopted in merger agreement and communicated to employees 11.10.20

14.Severance programs

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3 tiers based on non-exempt, exempt, or officer status

Maximum benefit of 26 or 39 weeks /

2 tiers based on officer or non-officer status

Maximum benefit of 52 weeks /

X

15.Employment policies

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No formal policy for telecommuting or alternative work schedules

40-hour work week /

Provides formal policy on telecommuting and alternative work schedules

37.5-hour work week /

X

16.Training and Development

/

Internal and external training provided

No stated requirement for hours of training per year /

Internal, external, and web-based training provided

Informal policy of 14 hours of training/year /

X

17.Promotions and Salary Increases

/ Officer promotions take place once a year; Associate Director and manager promotions take place every six months. Other promotions resulting from people assuming vacated roles take place as needed during the year. Routine salary adjustments are made annually. Market-based adjustments, or other adjustments for special situations, can be made at any time during the year. / Promotions are made on an as-needed or ad hoc basis.
Merit-based salary adjustments are made annually. Equity (or market based) adjustments are made during the year as needed. /

X

18.Staffing and Selection

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It is our understanding that the primary responsibility for staffing and selection decisions will reside in IMO/SC with support from OD/HR.

/

N/A

19.Merger Integration Training

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Consider defining this into sub-categories, such as New Hire Orientation, Benefit Enrollment, Management Training, PMP Training, Skills Training, etc., for pre-Day 1, Day 1, and post-Day 1.

/

N/A

20.HR Metrics

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Develop a recommendation and plan of action for HR metrics in Newco.

/

N/A

*Can include operating model, strategies, policies/procedures, systems use, staffing model, payment structure, design methodology, etc.

FutureState Recommendation

Ref # / Recommendation / Est’d timing for implementation
Please also see Exhibits A and B for compiled Benefits and HRMS recommendations.
1.0 / Guiding principle -Integrate the two organizations under one consistent HR approach with the same unified policies, programs, and practices. We will select programs and practices that have the least disruption to the employee base, unless the change will significantlydiminish value that could result in cultural misalignment, litigation, or serious employee relations issues. In which case, we will identify those areas and prepare a cost/benefit analysis on how to manage that area differently. / N/A
  • Maintain current Total Compensation (for Co. A) and Total Rewards (for Co. B) strategy which is to be at market or slightly better than the market in terms of programs and plans (including but not limited to compensation and benefits) provided to employees.

  • We will identify areas to save money without jeopardizing the stated principle above

2.0 / Newco will operate under a pay-for-performance philosophy and include three major components of cash compensation: / Day 1
  • Market-based pay

  • Short-term incentives

  • Long-term incentives (equity plans)

3.0 / Newco will have one combined health, welfare, and retirementbenefits plan which generally includes:
  • Non-retirement insurance plans (i.e., medical, prescription, dental, vision, and life insurance, EAP, FSA, etc.) Both Co. B and Co. A employees will be merged into one plan during Open Enrollment Fall 2021.
/ 1/1/2021
  • The following non-retirement plans will continue to operate, until the end of the calendar year only, with the same plan design and employee contribution rates that existed prior to the close of the pending merger for both Co. B and Co. A employees: medical, dental, vision, life (including optional, dependent, travel and AD&D), FSA, transit, and EAP
/ Day 1
  • Retirement plans (defined contribution): Co. Bemployees will merge into the Co. A retirement plan on Day 1. Co. B’s 401(k) Plan (secondary 401(k) contributions) will cease on date of close.
/ Day 1
  • Retirement plans (defined benefit): Co. B’s Pension Plan will be frozen as of 12/31/20 and merged into the Co. A’s Cash Balance plan. Special provisions will need to be made for Co. B employees with protected benefits under the Pension Plan and to make sure certain employees near retirement age are not unduly impacted by the change in benefit formulas.
/ 12/31/2021
  • Non-insurance plans (i.e., tuition reimbursement, severance policy, etc.): Will become effective for Co. B/Co. A on date of close other than where noted differently in our recommendations
  • Standardized severance policy: After special arrangements due to pending merger forCo. A/Co. B employees (per retention and severance policies) cease.
  • Paid Time Off: Employees of Co. A will be converted to a Paid Time Off (PTO) plan for vacation, sick, and personal days. Note: The amount of PTO days is still under review
/ Day 1
4.0 / Newco will have common training and development programs
  • Co. A’s current succession planning and leadership development programs will be adopted in new company
/ 1/1/2021
  • Training vendors between Co. B/Co. A will be consolidated to reduce costs
/ Day 1
5.0 / Co. B retiree benefits (i.e., medical and life insurance) will be terminated in the new company, except for a limited group
  • Retirees currently receiving benefits and future retirees eligible for benefits will continue to receive these benefits under the same terms and conditions of the current Co. Bplans
/ Day 1
6.0 / Co. B medical supplemental planwill be terminated in the new company at the end of the calendar year in which the pending merger is finalized / 12/31/2021
7.0 / Newco will leverage technology for more efficient and effective delivery of high-quality services. This will include but not be limited to operating on a single HRMS platform and using PeopleSoft’s self-service applications in order to appropriately shift transactional activities to employees and managers. / Phased (see Exhibit A)
  • Other non-PeopleSoft databases will also be consolidated into a single platform (i.e., one training database, one recruiting database, etc.) to reduce costs

8.0 / Newco will have one performance management program
  • Co. B/Co. A employees will be converted to one system on Day 1 as a transitional system to complete the remainder of the current performance cycle
/ Day 1
  • At the beginning of the new performance cycle Newcoanticipates(more detailed analysis still required) using an automated Performance Management System (Success Factors) to make the performance management process easier, faster, and more effective
/ 1/1/2021
9.0 / Newco will have transitional retention and severance programs in place for one year following the close. / Day 1
  • Severance will be paid in lump sum fashion for transition and ongoing operations

Day 1 Items


Ref # / Day 1 Actions / Owner / Comments
1.0 / Newco will have one common payroll platform / Accounting
  • Employee data must be loaded and tested prior to close to accomplish this
/ IT/Acct/HR/OD
  • Standard work-week hours communicated to employees of new company
/ HR/OD
2.0 / Newco will have one common HRMS platform / HR/IT
  • See Exhibit A for details on functionality and timing

3.0 / Newco will have one set of employment policies and procedures / HR
  • Receipt of new handbook materials
/ Comm/HR
4.0 / Understanding of staffing/selection decisions for post-close, as well as detailed process for notifications / HR/IMO/SC

Risk Analysis by Recommendation

Recommendation Reference / Description of Risk / Mitigation Strategy / Owner / Due Date
6.0 /
  • Potential litigation from officers (current and retired) with employment contracts
/
  • Assess risk with outside legal counsel and review approach with in-house legal and SC
/ HR/OD / 1/31/2021
9.0 /
  • Potential litigation risks from employees involuntarily separated at dates after, but close to, the cutoff date for triggering payment of severance benefits
/
  • Assess risk with legal counsel and adopt a separation policy (with respect to timing) that minimizes this risk
/ HR/OD / 1/31/2021
7.0 /
  • Potential disruption of HR service delivery due to delays in support system development (e.g., PeopleSoft, payroll processing, tc.)
  • Possible reduction in work efficiencies if self-service technology is not deployed
/
  • Effective project planning and management
/ HR/OD/IT / Effective immediately

Early Wins

Action / Win/Benefit / When Win Will be Realized
  1. Combination and rightsizing of OD/HR functions
/
  • Salary/benefits savings from staffing synergies
/ Likely in two waves – close to day 1, and approximately one year following day 1
  1. Leveraging technology to improve HR service delivery
/
  • Less time/effort (ergo improved productivity) in both line functions and the HR/OD function
  • Less rework due to online editing and information processing
  • Reduction in direct materials expenses
  • Increased data integrity
  • Increase speed of work processing
/ Through the end of 2021
  1. Reduction in professional fees (e.g., consulting services, training vendors, recruiting costs, etc.) due to duplication associated with both OD/HR functions
/
  • Reduced operating expenses
/ Immediately after close


High-level Cost/Benefit Analysis

Outstanding Decisions and Issues

Ref / Decision/Issue / Dependencies / Required Actions / Due Date
Performance Management Program / Further discussion needed to determinehow to convert employees to same system in 2021 / 2/28/2021
Co. A Severance Plan / Need to finalize draft policy / 12/31/2020
International Benefits – UK / Need to know staffing decisions for UK office / Recommend benefit approach / 12/31/2020
Workweek / Determine standard work week / 12/31/2020
Alternative work schedules and telecommuting policies / Determine approach for Newco / 2/28/2021
Integration of job titling schemes and rationalization of officer positions / SC to confirm scope and objectives and accountability / Analysis and development of alternative and recommended titling scheme and any required mapping of current titles into the “new” or preferred scheme / TBD from SC
Vesting schedule for Newco’s 401(k) Plan to be reviewed to consider reducing the time from 5 years to 3 years / Analysis to determine financial implications with reduced vesting schedule / 12/31/2020
Determine legal implications to existing wage garnishments due to change in employer status / Discuss issue with Legal / 2/28/2021
Research change in control language/provisions in Co. B’s 401(k) Plan document / Discuss with Legal / 12/31/2020
Analyze cost impact of retiree treatment recommendations and determine eligibility for grandfathered group / Work with Consultant (Co. B’s actuary) to determine cost / 1/31/2021
Develop a strategy for integrating compensation plans between Co. B/Co. A / Meeting week of 12/11 to map out approach / 12/31/2020
Determine benefit vendors for Newco / Meeting week of 12/11 to map out approach / 6/30/2021
Confirm Co. B’s 401(k) Plan contributions may cease on Day 1 / Discuss with Legal / 12/31/2020
Determine appropriate PTO schedules/banks for Newco / Benchmark program and conduct financial analysis / 2/28/2021
High-level timing and degree of impact for reductions in force post-close / Discuss with Synergies team / 3/1/2021
New company orientation program for policies, procedures, HR programs, etc. / Work with Communications team / 1/31/2021


Communication Plan

AUDIENCE / MESSAGE / VEHICLE / TIMING / COST
Est. / RESPONSIBLE PARTY
(What?) / (How?) / (When?)
Participants in the Executive Program / The plan will be discontinued. / Combination of face-to-face and written communications. / Soon after Day 1 / Minimal / TBD
Employees who will lose jobs as a result of the merger / Business reasons dictate that you will not have an on-going role with Newco / Combination of face-to-face and written communications. / Soon after Day 1 / Minimal / TBD
Employees who will remain with Newco on a transitional (or short term basis) / While your current role remains very important to shareholders and customers, business reasons dictate that this role will continue only for a specified period of time. After that time (details to follow) / Combination of face-to-face and written communications. / Soon after Day 1 / Minimal / TBD
Employees who are expected to remain with Newco for the indefinite future / Here are the HR/OD programs, policies and procedures for Newco, and here is what you need to know and do in order to most effectively participate in these programs / Combination of face-to-face and written communications, plus incorporation of all this info into the Newco Website / Soon after Day 1 / This cost could be extensive, into the 000’s. / TBD
Co. B retirees and active employees eligible for retirement / Explanation of the Co. B’s retirement benefits (medical and life insurance) program and how they will be handled in the new company / Letter / Soon after Day 1 / Minimal / TBD

Notes