Mergers and acquisitions are on the rise across the nonprofit and education sectors as organizations seek efficiency and scale. There is great potential in joining forces, including shared overhead, expanded reach, and collective learning; however, the challenge lies in weaving the two organizations’ cultures together.
Compensation is often one of the best places to begin. How you pay people shapes how roles are defined, influences financial decisions, and impacts retention, trust, and staff engagement. A unified pay philosophy creates clarity across teams, helping management teams align expectations, harmonize structures, and retain key talent.
Getting this right not only reduces anxiety in times of change but also lays the groundwork for long-term synergies and sustainability across the new organization.
Below are six key steps to building a unified compensation program after a merger.
2. Gather Input to Prioritize Differences
3. Demonstrate Positive Momentum with Quick Wins
4. Build Toward One Compensation Philosophy
5. Create Job Families and Identify Outliers
6. Use Market Data to Make Informed Decisions
7. Why External Guidance Matters
8. Turning Constraint into Opportunity
The first step in merging compensation programs is a gap analysis. Think of it like a Venn diagram: where do the two organizations overlap, and where do they diverge? This exercise helps you identify reconciliation points, where you already have common ground and where you’ll need to navigate real differences.
This process is also part of the organization’s merger due diligence. Leaders need a clear understanding of how base salaries, incentive plans, and long-term incentives compare across both organizations before determining what should be harmonized.
The analysis should also prompt deeper strategic questions:
Should the two entities continue to operate with separate compensation systems during the transition period?
Is the goal to develop a single, unified pay philosophy that encompasses both organizations immediately?
Or would a phased approach be more effective, such as a two- to three-year plan to gradually achieve cohesion?
Each of these approaches can be effective, depending on the complexity of the merger and the level of alignment (or misalignment) you encounter. What matters most is understanding the landscape before making any decision. A careful gap analysis will reveal what you’re working with and set the stage for how you will prioritize changes and develop effective communication plans.
Once you’ve mapped the differences, the next step is understanding how important those differences are. Not every variation between two organizations requires equal attention.
Some policies may actually present opportunities to strengthen cohesion. For example, one organization might have a policy that most employees dislike. If the other organization’s approach is more popular, this merger presents an opportunity to shift practices in a way that builds value and earns staff support.
On the flip side, some benefits or policies are so well-loved that removing them would create unnecessary backlash. For example, one client offered free lunch to staff—an inexpensive but meaningful perk that was deeply tied to morale. Taking it away would have been disastrous.
That’s why prioritization matters. Leaders should ask:
Which differences are opportunities to harmonize and improve culture?
Which ones are non-negotiable and should remain untouched?
Which are minor enough that they can be phased out or shifted without real impact?
To answer these questions, organizations must engage staff directly. Discovery tools like surveys, focus groups, and manager interviews uncover what employees value most, what frustrates them, and what they’re indifferent about. This feedback narrows down the universe of differences into a manageable set of priorities, helping leadership focus on the changes that truly matter.
Mergers naturally spark fear and anxiety among staff. People worry about what’s changing, whether their roles are secure, and how salary structures or benefits will be impacted. That’s why it’s essential to create positive momentum early in the process.
Quick wins are symbolic, and they should be tied directly to known pain points that staff have already raised. By addressing those first, you demonstrate that the integration process of the merger can deliver real benefits for employees, not just efficiency for leadership.
This approach helps staff breathe easier, reduces resistance, and builds excitement about what’s ahead. In short: quick wins lower fear, build trust, and set the stage for long-term cohesion.
Over time, staff need to see that they belong to a single organization with a shared compensation plan. Without this, resentment is inevitable. Questions will arise: Why is that team paid more? Why do they get bonuses and we don’t?
That doesn’t mean every employee must be on the same compensation package. In healthcare, for example, doctors and nurses typically follow a step schedule, while administrative staff are generally assigned to pay grades. In education, teachers may use a step structure while central office staff follow bands. In EdTech, program staff may be on pay grades, while sales staff rely heavily on commissions. These differences can work, but only if the logic is sound and transparent. Staff need to understand not just what the system is, but why it exists.
Before rolling out changes, leaders should pilot, pressure-test, and gather input. Ask staff for feedback, invite questions, and engage in dialogue. It is better that employees surface concerns directly than whisper them behind closed doors. As we sometimes say, “The icebergs are there whether you know it or not. Find them early so you can navigate around them.”
Tools like Edgility’s compensation philosophy worksheet can guide these macro decisions, helping leaders clarify principles, test scenarios, and communicate consistently.
Once the philosophy is clear, group roles are based on responsibilities, scope, and experience—not job titles or current pay. Ask the following questions: Are they individual contributors? Do they manage a team or multiple departments?
This exercise often reveals inflated or inconsistent job titles between the two organizations (e.g., “Director” in one organization might be equivalent to “Senior Director” in another). It can also uncover areas where one entity historically overvalued or undervalued certain roles.
From there, you can:
A merger is a significant organizational change, making it the ideal time to benchmark pay against the market. This step clarifies whether disparities between the two entities are anomalies or market-driven.
Market analysis allows you to:
Strong rollout and communications are essential here. Leaders and managers should be prepared to answer the inevitable “What does this mean for me?” before announcing changes to the whole organization.
During mergers, we have repeatedly seen that loyalties can influence decision-making. While done with good intentions, leaders may try to justify anomalies based on personal relationships or organizational history. Bringing in an external consulting firm provides objectivity and builds trust among staff that the process is fair, data-driven, and free of hidden agendas.
Merging two compensation programs is complex and time-consuming. Even well-intentioned leaders may try to “logic away” outliers based on loyalty or relationships. Partnering with an external consulting firm like Edgility provides an unbiased perspective, helps harmonize philosophies, and ensures decisions are grounded in data and fairness.
External advisors also help management teams balance competing priorities—aligning pay philosophies, incentive plans, and financial sustainability—while maintaining trust among staff.
Working with the right consulting partner gives you the capacity, clarity, and confidence to build compensation systems that last—grounded in equity, sustainability, and your organization’s mission.
Designing a unified compensation program after a merger isn’t about patching two systems together. It’s about using a moment of change to reimagine pay in a way that reflects your shared mission, values, and future.
Like moving into a new house, a merger is a chance to do “spring cleaning”—to let go of outdated practices, declutter what no longer serves, and start fresh with clarity and alignment.
👉 Want to learn more? Download our guide Compensation with Purpose: Designing Equity-Centered Pay Structures for Nonprofits, Education, and Healthcare, or schedule a complimentary Discovery Consultation with Edgility Talent Partners to explore how we can help your organization build equitable, sustainable pay systems that support your mission.