Thinking about a Public Offering? Learn how HR can drive value and help an organization thrive as a newly public company

Human Resources (HR) plays a pivotal role in the high-stakes environment of launching an Initial Public Offering (IPO). As discussed in the first article of our IPO series covering HR’s role in IPO Readiness, becoming a publicly traded company marks a significant milestone in a business’s lifecycle. HR is expected to play a heightened role in driving value and managing enterprise risk to support both the launch of an IPO and to flourish as a public company.

As companies transition from privately held to publicly traded, HR must not only manage but also actively contribute to creating value after the IPO. The intricate balance of workforce planning, equity plan administration and technology, executive and equity compensation, employee communications, and robust process documentation falls squarely on the shoulders of HR professionals. This article delves into how HR can leverage its unique position to influence success, from pre-IPO strategies to enduring post-IPO stability.

This structured approach not only prepares the HR department for immediate changes during the IPO but also sets a foundation for ongoing post-IPO stability and success.

Below, we expand on the five pillars and highlight key HR-led activities that support decision-making, along with general timelines for executing the activities.

1. Workforce Planning and Costing

HR is the organizational design hub, crucial in building, costing, and sourcing talent for functions critical to launching the IPO and managing the business once it is publicly traded. Coordinated planning led by HR including sourcing strategies (insource, outsource, co-source), hiring timelines, and costing creates a more efficient talent acquisition process and adds rigor and credibility to the financial model. In our experience, the following infrastructure functions typically are considered for additional skills and capabilities:

Key Activities:

• Benchmarking: To set benchmarks, conduct a peer group hiring activity analysis for the 18 months pre- and post- IPO.
• Collaboration: Work alongside functional department leaders to identify and address talent gaps.
• Strategy Development: Formulate a sourcing strategy, establish a hiring timeline, and estimate costs.

2. Executive and Equity Compensation Planning

As your organization approaches its IPO, HR’s role in the design of executive and equity compensation programs is crucial. These programs are central to reflecting the company's strategic priorities and culture, and essential for attracting and retaining top talent. Facing intense scrutiny from shareholders, regulators, and the public, it's vital to develop a transparent, robust compensation strategy. Ensure your strategy aligns with business and talent goals, is fact-based, and considers market norms. Proper planning during the IPO readiness phase is critical to enable confidence in the compensation framework's design and rationale.

During the planning period, many companies also enhance their broad-based employee compensation plans to support career pathing, succession planning, and compliance activities, such as pay equity.

Compensation-related activities include:

• Compensation Philosophy: Establish and articulate the company's compensation philosophy.
• Global Compensation Framework:?Manage global executive and equity compensation, including Long-Term Incentive Plans (LTIP), IPO-related compensation, and Employee Stock Purchase Plans (ESPP).
• Governance:?Develop compensation-related governance provisions.
• Directors' Compensation:?Outline compensation structures for the Board of Directors.
• Job Structuring:?Define job architecture, job leveling, salary grades, and ranges.
• Compensation Disclosure: Prepare for public company executive compensation disclosure requirements.

Benchmarking and Design Activities:

• Develop public company peer groups (IPO and competitor).
• Benchmark against IPO and competitor peer groups for share reserve levels, pay scales, and governance provisions.
• Design comprehensive executive and equity compensation programs, as well as Director pay structures, incorporating global tax and compliance considerations.

Please see our article titled “Thinking about a public offering? Create executive compensation programs that highlight your priorities to employees and shareholders” for more detailed considerations.

3. HR Technology and Equity Plan Administration

In the public company environment, HR may face heightened administration, compliance, and public disclosure requirements while keeping a sharp focus on the employee experience. Effective plan administration and compliance depend on timely access to accurate data to address the increased disclosure demands related to executive and equity compensation, human capital metrics, employee pay, remote work, and business traveler activity.

Recognizing these enhanced requirements, many companies assess and frequently upgrade their HR technology systems. This modernization supports the information and disclosure demands of a public company, allows for more seamless integration with other enterprise systems, offers enhanced user security and privacy controls, and provides scalability aligned with the company's growth ambitions.

IPO-Related Technology Assessments Commonly Consider:

• Equity Compensation Plan Administration
• HRIS/Reporting Capabilities
• Remote Worker/Business Travelers

Activities to Enable Effective Vendor Selection:

• Develop business requirements to align with strategic goals.
• Coordinate client needs with select vendors for compatibility.
• Participate in vendor demos to evaluate potential solutions.
• Complete scoring system to evaluate vendor offers.
• Provide oversight during the implementation phase.

4. Employee Experience and Communications

HR has a unique opportunity to reinforce the employee experience with a proactive communications strategy. Employees are eager to understand how the IPO may impact their roles, rewards programs, and their ability to buy and sell stock. A structured communications and training program is essential to inform and engage employees during this significant company milestone, which can lead to better retention of key talent.

Activities to Enhance Employee Communication:?

• Develop an IPO and rewards communication strategy that addresses key employee priorities.
• Outline the information and content needed, determine the forms of communication to be used, and assign roles and responsibilities.
• Create engaging communication content tailored to different employee groups and stages of the IPO process.
• Deliver communications through chosen channels for wide reach and impact.

5. HR Governance

HR process documentation and controls often require updating to reinforce good corporate governance and meet internal auditors' expectations and Sarbanes-Oxley requirements. This need can become more pronounced in a public company environment since such controls are often less emphasized in privately held companies.

Activities to Enhance Documentation and Controls:

• Identify Needs:?Identify operational processes and controls that require development.
• Conduct Interviews:?Interview HR functions and dependencies to thoroughly understand existing processes, identify any gaps, and note necessary modifications.
• Develop Documentation:?Create detailed workflows and narratives to clearly document the revised processes.

Get in Touch

Becoming a publicly traded company is a significant achievement but is also just the beginning of a new journey.

We are here to help. Contact us to arrange a meeting to discuss your organization’s needs, respond to an RFP, or answer any other questions.

This article is the second in a series that covers HR considerations when preparing for an IPO.

This article contains general information only and Deloitte is not, by means of this article, rendering accounting, business, financial, investment, legal, tax, or other professional advice or services. This article is not a substitute for such professional advice or services, nor should it be used as a basis for any decision or action that may affect your business. Before making any decision or taking any action that may affect your business, you should consult a qualified professional advisor. Deloitte shall not be responsible for any loss sustained by any person who relies on this article.

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