A solid executive compensation program both recruits great new leaders
and keeps your present team intact, but be sure it matches your organization’s
profile and stage of development.
If, as is often said, the speed of the team is the speed of the leader, good
executives can supercharge your company’s performance. But if your executive
compensation program is out of line with your company’s goals or, if
it’s inappropriate for your stage of development, it can also strand
you with a financial flat tire.
What are the makings of a good executive compensation program?
First and foremost, executive compensation must be aligned with the mission
of your business, according to consultants in the area.
Is yours primarily a sales-oriented organization? Then the executive compensation
would be far different than in that of a concern whose prime responsibility,
say, is the efficient administration of assets. In the first case, executive
compensation would tend toward incentives for performance. In the latter,
a more salary-based approach would be appropriate.
Second, is the goal of your executive compensation to attract new recruits
or keep your current stars on the team?
It’s common to design different executive compensation packages for
each need. To bring the best on board, executive recruiters often recommend
as bait powerful short term incentives, achievable in a year or even less.
If, however, your goal is to retain long-term players, your executive compensation
package should focus more on goals with payouts only after three to five years.
This serves as a powerful inducement for executives to stick with your program,
regardless of what the competition may dangle to lure them away.
Develop your executive compensation along with your company
It’s also vital is to match the type of executive compensation you
offer to the stage of development your business has reached. Typically, start-ups
will incent their executives with stock options, playing to the same expectation
of growth that made the executive sign on to a new firm in the first place.
More mature organizations will still pay in stock, but in outright stock awards
which have immediate worth.
Two forms of executive compensation almost always welcomed are company-paid
medical plans and generous retirement packages. Medical coverage is often
a tax-free form of executive compensation, an important plus to highly-paid
leaders. And retirement packages tell your execs that, if they lead you to
wealth in their working years, some of that wealth will follow them into later
life.