This week, I spoke with a finance director facing a proposed merger. One organisation employs around 340 people; the other roughly 200. The transaction itself is one challenge. The harder question comes next: how do you turn two organisations into one without losing financial control along the way? For CFOs, once the financial due diligence is complete, that question should begin with the workforce.
Establish the workforce baseline first
Before debating which HR system survives, management needs a reliable picture of what is actually being brought together. How many employees and FTEs are there? What are the total workforce costs? How are employees distributed across legal entities, departments, cost centers and countries? Which roles overlap? How many management layers exist? What benefits, bonuses, pension obligations and contractual commitments are being inherited?
This is where organisation design starts to become financial infrastructure. A merger should not simply bolt two organisation charts together. It creates an opportunity to design the New Company: its positions, reporting lines, spans of control, functions, vacancies and organisational layers, while making the financial consequences of those choices visible. The CFO should be able to compare the combined organisation as it exists today with different target-state scenarios, and understand the impact on FTE, payroll and ongoing run-rate costs before decisions are implemented.
Then comes payroll
Payroll rarely makes the headlines when an acquisition is announced. Yet during integration, it can quickly become one of the biggest operational risks. Two organisations may bring different payroll providers, pay cycles, employee definitions, allowances, pension arrangements, time and attendance systems, general ledger mappings and data structures. PwC has described M&A as a particularly relevant moment to reconsider the payroll operating model: standardised processes and reporting can create efficiencies, while local flexibility remains essential for regulatory compliance. For Finance, payroll migration also needs to be demonstrably under control. There is a significant difference between:
“HR tells me the migration is going well.” and: “99.87% of payroll has been reconciled.€286 remains unexplained.” The second is financial control. There are also less visible liabilities. Accrued holiday, for example, is not merely an HR data point; it represents a financial obligation. Add outstanding bonuses, overtime, commissions, retention arrangements and other employee commitments, and workforce data begins to look very much like finance data.
Design first. Consolidate second.
Organisation design and impact analysis should therefore come before systems consolidation. They give management visibility into the combined workforce: employees, positions, reporting lines, organisational layers, workforce costs and the financial consequences of different target-state scenarios. The objective should not be to replace systems immediately. It should first be to determine what the future organisation needs to look like, and what data, processes and controls the new company will require. Only then can HR and payroll environments be rationalised and standardised around that target state. Temporary fragmentation may be necessary. Permanent fragmentation is another matter. Over time, multiple HR systems, payroll providers and integrations increase licence costs, consultancy spend, manual reconciliation, operational complexity and risk. They also make it harder for management to maintain a single, reliable view of the workforce. The result can be an uncomfortable one for the CFO: legally, the business has become one organisation. Informationally, it’s still several. What management ultimately needs is simple:
One dataset. One view. One workforce.
This is where we see an important role for PeopleCoral. PeopleCoral can act as the workforce integration layer for the new Company , bringing two organisations together from an information and organisation-design perspective before every underlying system has to be consolidated operationally. One Employee Master Record. One organisational model. One integrated view across HR, Finance and payroll.
Understanding and redesigning the organisation is where the real integration begins.
Curious about PeopleCoral’s organisation design and analytics capabilities? Visit https://peoplecoral.com/and book a demo.