Compensation culture clash

That was Don Mann's first thought on learning that PepsiCo Inc. in Purchase, N.Y., would consolidate the IT staffs of subsidiaries Pepsi-Cola Co., Frito-Lay Inc. and Tropicana Products Inc. into a shared-services organization spanning the entire company.

Mann, who had been a longtime consultant at PepsiCo before joining Frito-Lay, knew that the rest of his staff and colleagues were asking the same question.

After merging in 1965, Pepsi-Cola and Frito-Lay had operated separate IT systems and organizations for more than 30 years. But with the acquisition of Tropicana in 1998, then-CIO Steve Shuckenbrock decided to streamline IT by creating the PepsiCo Business Solutions Group (PBSG).

Sticky personal questions quickly arose. Launching PBSG involved more than technical and operations issues. It also called for the complete restructuring of salary structures, job categories and titles, lines of reporting and career paths. Every IT employee in all of the companies would be affected.

"We faced serious change-management issues," says Mann, who is now vice president of application development at PBSG. "It's not easy to restructure job codes and classifications for employees who've grown up in one company, who are comfortable there, who understand the culture and their career paths."

But these issues about the personal impact of merger-and-acquisition activities must be dealt with alongside salary and benefit issues for IT employees, say benefits consultants, human resources specialists and managers in postmerger IT departments.

Mishandle or ignore such apprehensions, and the manager can expect IT employees to jump ship in droves, regardless of compensation packages, consultants and specialists warn.

PepsiCo became well aware of the value of the approximately 1,000 IT employees who would be part of PBSG, says Shan Burchenal, director of compensation at PepsiCo and the designer of the new compensation structure for PBSG. She and other human resources specialists interviewed IT senior managers to understand their issues and priorities. PepsiCo also contracted with New York-based consulting firm William M. Mercer Inc. for data about what salaries the market was paying for various IT positions.

"We were starting with a white sheet," says Burchenal. "We wanted to be at the forefront of what was being done for IT." In particular, that meant finding ways to get pay beyond base salary to top IT performers.

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