Board Brawl Averted
A Board of Directors disagreed about whether pay levels for the executive team were appropriate. A discussion with the Board revealed that each Board member was bringing different values and expectations to the pay review process. CW took the Board through a Compensation Philosophy development tool that allowed the Board to air their differences and reach consensus about how pay should be viewed. Using this new compensation philosophy, a market analysis was conducted and a new base pay, cash incentive and equity plan was implemented. The Board and the executives are all comfortable with the new direction and the Board meetings are much more fun!
An Elevator or Pay Entitlements?
An organization with very long tenured employees had hundreds of different job titles and significant complaints about internal equity. A complete assessment of the compensation program was conducted. As a part of this assessment, CW identified many important changes that needed to be made to the pay plan. $500,000 in annual salary expenses were going to employees who had been promoted and then demoted when there were unable to perform at the higher level. These individuals continued to stay at the higher pay grade and continued to earn pay increases every year. Although the CEO had previously been committed to never reducing pay grades or capping employee pay, when he realized that he could afford a new elevator that was desperately needed, he decided to re-think his position.
Pay caps were introduced. Individuals were notified of several small pay reductions over several years. The affected employees were disappointed but realized that they had benefited for many years from the higher pay levels. Several expressed surprise that their pay had not been adjusted previously.
CEO Pay Negotiation
After 5 very successful years, the CEO’s employment agreement was coming up for renewal. The CEO asked CW to provide him information to use during his negotiation with the owners and the Board. Rather than provide the CEO with salary information, CW engaged with the Board. Using market data as a driver, CW worked back and forth between the Board and the CEO to ensure that there was agreement and understanding of the compensation philosophy and the benchmarking process used. Based on the analysis and the various discussions with each side of the negotiation, a revised employment agreement was quickly and painlessly reached. Both sides felt they had an opportunity to air their perspectives and were comfortable with the final recommendations.
Stock Options Were Not an Option
With a critical business transition looming, there was concern that the CEO was at risk of leaving and that the pay package was not at market rates. A thorough analysis of base pay, short-term incentives, long-term incentives (equity equivalent) and perquisites was conducted. Target pay rates were identified based on a combination of publicly traded and privately held pay packages.
To bring the pay levels up to a blended market pay rate, a faux equity plan was developed that focused on shareholder return with a 4 year vesting horizon and a Rabbi Trust. The plan included a kicker for the first few years that provided some “glue in the seat’ until the full plan kicked in during the 4th year. In addition, the discretionary annual bonus was revised into an incentive plan that measured short-term results and balanced the long-term focus of the faux equity plan.
A Complete Revision
A bio-medical organization requested Compensation Works’ assistance to achieve the following goals:
To achieve these goals, Compensation Works (CW) reviewed existing compensation structure and practices to identify critical needs and worked with the executive team to identify a compensation philosophy. With a clearly written philosophy in place, market benchmarks were identified for approximately 60 positions within the organization. This included 20 science/research positions and 40 administrative and management positions.
Local, national, cross-industry and industry-specific salary survey data were utilized to conduct the market assessment for each position. The market assessment included an analysis of salary survey data for similar-type positions; 80% or greater job similarity in function and requirements was required for each match to be included. Using this data, two formal salary structures were created: one for scientific positions and another for administrative and management positions.
Administrative guidelines for managing the new system were developed and a full evaluation of individual employee pay levels was conducted. A projected budget was established.
The project took approximately 3 months and resulted in a clearly defined compensation philosophy and strategy. Communication to all employees was provided via company-wide email and through open discussion in an “All Staff” meeting format. Managers partnered with CW and Human Resources to understand the impact of the new system during the annual performance evaluation and pay increase period. Thanks to a clear communication and implementation process, was successful in establishing the new system. The pay system has been in place for over 5 years and is continuing to be maintained by a new HR Director and team.
A high-tech company had grown to a point where it was no longer feasible to have one or two individuals making pay decisions for the whole organization. In addition, employees were bringing salary information off the internet and asking questions about how pay decisions were made. It was increasingly difficult to have these pay discussions with employees.
Compensation Works was brought in to develop a new compensation structure and pay practices. A new broad-based equity plan was also developed.
All managers with responsibility for making pay decisions were trained on the overall compensation system. The training included case studies, including how to talk with employees who come in with internet salary data and other career progression and pay concerns.
Take the Stress Out of Pay Discussions and Decisions
A professional services firm was managing their pay differently for different parts of the organization. Concerns about pay discrimination and internal equity drove the need for implementation of an organization-wide and consistently administered pay plan.
The new plan included market analysis of all jobs, development of a new pay structure and incentive plan. One of the key managers was extremely resistant to the new process and the new structure. The first year he sat in the meetings with his arms crossed and scowling. We continued to work with him and the team in the following two years. By the third year, he bounced into our meeting all smiles. He explained that he was finally able to explain pay decisions to employees and the new tools have made his life much easier.
Are You Ready for Pay for Performance?
A large heavily unionized organization wanted to move to a pay-for-performance model for their non-union staff. There was concern that moving to a pay-for-performance model could result in additional unionization.
Compensation Works (CW) conducted an assessment of the organization’s compensation practices and perceptions. Through a series of interviews, surveys and data analysis, the organizational culture and pay-for-performance temperament was assessed. There was clear interest throughout the organization to move to a pay-for-performance model which supported some new lean and quality initiatives.
A comprehensive 3 year implementation plan was developed. The plan included:
a streamlined and re-aligned base pay plan,
an internal assessment of every individual’s current pay rate compared to a new pay placement table and the new pay rates
A new performance management program that was implemented over a three year period.