January 04, 2001, 11:05 AM — 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.
PepsiCo couldn't match other companies' promises of issuing stock options before their initial public offerings (IPO). But it did institute competitive salaries, extend its performance bonus program down to junior IT employees and institute "hot-skills pay." Employees with skills in extremely high demand, such as Java, SAP and database programming languages, are eligible to receive hot-skills pay worth about 10% of their base salaries, with installments paid quarterly.
"You can pretty much do what you want to reward performance," says Burchenal. However, be prepared to take some flack from other departments about IT-specific compensation structures, she says.
"We had to educate our counterparts in sister divisions about IT's unique needs," says Leslie Wilemon, human resources director at PBSG. That was especially true of the bonus program, which at PepsiCo companies had long been a management-only perk.
The name game
Unlike PepsiCo, most companies don't approach merged IT departments with a clean slate. Instead, they try to shoehorn the new acquisition into an existing structure, which often leads to poorly integrated IT departments. The result is that workers don't fulfill their hoped-for potential, says David Van De Voort, principal consultant at Mercer's IT Workforce Effectiveness Group in Chicago.
For example, job titles and categories, which often define IT career tracks and salary levels, can't be thought of as minor details. Agency.com Ltd., an interactive services firm in New York, acquired eight other properties within about two years, building an IT staff of some 55 people, with 40 in regional and international offices.
"There were vast differences in the titles people gave to the different skills," says CIO Danny Gumport. Agency.com's IT managers approached the problem first by looking at job descriptions and agreeing on IT disciplines, then working to define common job titles across the offices.
"It's tough to know if you have the talent you need when all the titles are different," Gumport adds.
Synchronizing job titles also helps Agency.com offer equitable pay across job titles, whether the job is in Copenhagen or New York. However, Gumport says, there are regional differences in the firm's IT salaries, reflecting the hiring competition and cost of living in different cities and countries.
The options issue
