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It’s no secret that a war for talent has been declared in the tight Houston market. Not only is the energy sector soaking up much of the labor pool, but the growing gap in workers ages 30 to 50 leaves owners worrying over their succession plans and how to retain senior leaders. At CPA and advisory firm Doeren Mayhew's recent client conference, compensation veteran and author Chris Crawford of Longnecker & Associates provided an understanding of the competitive landscape for key talent, best practices for variable pay, evolving regulations on executive pay and how to maximize compensation dollars.
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Turning Carrots into Karats
Chris Crawford, PresidentLongnecker & Associates
Copyright © 2014. All Rights Reserved.
Discussion PointsBACKGROUND• How Total Rewards has evolved into today’s structure• The war on talent• The move to variable payVARIABLE PAY• Do bonuses work?• How do you select the right performance measures?• How do you set goals and payouts?LONG‐TERM INCENTIVES – GOLDEN HANDCUFFS• Vehicle, value, vesting• Eligibility• LiquidityA WORD TO THE OWNER‐EXECUTIVE• Replacement ValueALTERNATIVE CURRENCY CONSIDERATIONS
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BACKGROUND
Evolution of Total Rewards
Components• Salary• Benefits
• Salary• Variable pay• Benefits
• Salary• Variable pay• Equity• Benefits
• Salary• Variable pay• Equity• Benefits • Retirement Benefits• Employment Agreements• The Work Experience• Perquisites• Time Off
Pay Total Cash Compensation
Total Direct Compensation
Total Rewards
• Retirement Benefits
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War for Talent
VARIABLE PAY
The Move to Variable Pay
Unparalleled Corporate
Governance
Media Attention(Haves vs. Have Not's)
Market Volatility
SEC wants better disclosure for Public
Companies
Market practices
Shareholder & Employee Scrutiny
Reduction in Retirement
Benefits
Cost Control
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Do Bonuses Work?
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Do Bonuses Work?
• A lengthy review by L&A of over 20 studies and books published by the major survey houses and strategy firms concludes the following:– Companies with Variable Pay Plans have significantly better corporate performance
– Companies without Variable Pay Plans are typically in the bottom quartile of performance
– Companies with Variable Pay Plans withstand economic volatility much better
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Do Bonuses Work?
• A lengthy review by L&A of over 20 studies and books published by the major survey houses and strategy firms concludes the following:– Star Performers are more attracted to companies with Variable Pay Plans
– The replacement costs to stay market competitive utilizes greater fixed costs like base salaries, healthcare and pensions, and are a much more expensive form of currency with far less variable cost controls
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How Do You Select the Right Performance Metrics?
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How Do You Select the Right Performance Metrics?
Corporate Mission
Business Strategy
Human Resources
Philosophy & Strategy
Total Rewards Strategy
Variable Pay Philosophy
Variable Pay Program Design
Variable Pay Measures
and Payouts
Program Review & Audit
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How Do You Select the Right Performance Metrics?
Line of Sight
Long
Short
Individual Team or Workgroup
Org. Unit Organization‐wide
Level at Which Performance is Measured
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How Do You Set Goals and Payouts?
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LONG-TERM INCENTIVES
Long-term Incentives-Golden Handcuffs
• Vehicle, Value and Vesting• Eligibility• Liquidity
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A WORD TO THE OWNER EXECUTIVE
Replacement Value
Replacement Value is the Key!• An owner executive could be an owner/family
member and go play golf everyday, but you would have to hire and competitively pay a new executive.
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ALTERNATIVE CURRENCY CONSIDERATIONS
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Alternative Currency Considerations
– What’s a Dollar of Base Salary Worth in Benefits, Time Off, Annual Incentive, Long‐term Incentive, Retirement Dollars, Short Commute, Free Parking, Recognition Awards, Fitness Program, Being a part of the decisions or solutions, etc.
– Survey Your Employees & Tailor your Programs
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Alternative Currency Considerations
– Numerous Studies of employees have found the most important priorities employees want from their jobs are:
#1 Career/Learning Development Opportunities#2 Recognition#3 Competitive Compensation#4 Better Boss
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Alternative Currency Considerations
– Budget 1‐3% of Payroll per year– Recognition Awards offer greater perceived value than any other form of total rewards• Studies have shown that recognition awards can deliver 3‐4x the value of the dollars spent
– Some Great Ideas for Recognizing Employees
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Questions and Contact Info
If you have any questions regarding this presentation, or any other compensation or corporate governance issues, please contact us.
Longnecker & AssociatesEmail: [email protected]
Phone: 281.378.1350www.longnecker.com
