Benefits and Compensation

Comp 2012: Smart Tactics for Uncertain Times

Pasteris is president of TLMP Consulting Group and Lipis is owner of Lipis Consulting Inc.

Focal points: All Companies

Since for most companies there’s not a lot of money to go around, the question is, how do you get the best bang for the buck? Here’s what WorldatWork’s 2012 survey projects:

Actual 2010

Actual 2011

Projected 2012

Mean

Median

Mean

Median

Mean

Median

GeneralIncrease/COLA

1.4%

1.0%

1.5%

1.9%

1.7%

2.0%

Merit

2.3

2.5

2.6

3.0

2.8

3.0

Other

0.9

0.5

0.9

0.5

0.9

0.5

Total

2.5

2.7

2.8

3.0

2.9

3.0

Note: “General increase/COLA,” “merit” and “other” do not add to the “total increase” because not every organization provides all three types of increase.

Staying Competitive Without Breaking the Bank

How can we work with a 3 percent merit increase budget and still achieve our goals or retaining our good people? You have to work your merit increase matrix, Pasteris says. You’ve got to give as much as you can to top performers and especially those low in the range. And, no surprise, that means nothing for poorer performers and those high in the range.

Sample Merit Increase Matrix

 

Position in Range

Performance Level

Zone 1

Zone 2

Zone 3

Zone 4

4

6-8%

4-6%

2-4%

1-3%

3

4-6%

2‐4%

1‐3%

0

2

2-4%

0

0

0

1

0

0

0

0


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Identify Your MVPs

There’s often no response, says Pasteris, when we ask, Who are your MVPs and what are you doing comp-wise to feed these eagles? In general, we don’t think that companies do enough to identify those folks and treat them as special.

Recognize When Jobs Have Changed

Many people have been cut loose, and often their jobs were picked up by other people. These changes that were once stopgap are now essentially permanent, yet compensation hasn’t been changed to recognize this.

Pay Attention to Generational Differences

When crafting total rewards packages, keep in mind that different generations are motivated by different things, says Pasteris. The table below is one source’s take on generational differences.

Attraction Drivers

Gen Y

Gen X

Boomers

Career Advancement

1

2

8

Competitive Base

2

1

1

Learning/Development

3

6

Challenging Work

4

3

2

Convenient Location

5

4

3

Reputation as Good Employer

6

7

4

Flexible Schedule

7

5

5

PTO

8

10

Competitive Benefits

9

9

Reasonable Workload

10

Organization’s Financial Health

8

Competitive Retirement

10

Source: Towers Watson “2011 Talent Management and Rewards Survey”
Gen Y=under age 30
Gen X=ages 30‐46
Boomers=ages 47‐64

You really don’t want too many different reward systems, says Lipis, but nevertheless it’s important to recognize that studies do show big differences between generations.


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Focal Points for Public Companies

Scrutiny of compensation continues unabated, says Lipis. No doubt, more and more audiences are looking at what you are doing.  Some organizations do nothing but watch. Here are some of the key things to be concerned about:

  • Transparency issues
    • Corporate governance, proxy advisors and observers
    • Say on Pay—(We think it will be a larger issue as time goes on.)
    • Risk management—for example, allegations that execs took excessive risks to get a bigger bonus
    • Proxy access by shareholders
  • Continuing call for more link pay to performance
    • Equity awards – linking performance to vesting and full value vs. options
    • Clawbacks if you find out that someone cooked the books
    • More board discretion, usually moving compensation to the downside when they think incentives haven’t been earned
    • Reduced severance
    • Double trigger “Change in Control” agreements (Some CICs led directly to golden parachutes. Double trigger means first there has to be a change in control and then the person has to lose his or her job.)
    • Elimination of tax gross-ups.
  • Election year issues: Which party takes control?
    • Less scrutiny and regulation?
    • Or not?
  • “Occupy Movement. ” It’s a wild card, says Lipis. It’s likely to have some impact on executive compensation, but it’s hard to tell what.

In tomorrow’s advisor, focal points for private companies, and how to respond to employees with online data, plus news of a timely webinar—Managing and Motivating Difficult Employees.

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