One size does not fit all

In this economy — with the current and future workforce — it’s vital to offer a total compensation plan of base compensation, incentives, benefits, time off, ancillary, etc.

Just like you would research a new product or service before launching it, including taking a futuristic approach, you need to study your workforce’s demographics to determine what employees want out of their jobs. Is there an ideal combination, a total compensation offering, that is competitive, cost-effective and compliant for all generations? Bottom-line, the answer is no.

A one-size-fits-all total compensation package won’t accommodate all employees. To attract and retain a diverse and talented workforce, you must offer benefits packages that speak to each generation’s values and lifestyles.

Pay for performance vs. talent

The traditional pay for performance model — where employees are rewarded for past performance — addresses only one component needed to retain the best performers. The new model is driven by differentiation.

An organization rewards employees by combining past performance, critical skills and experience, and future potential, in support of current and emerging business goals. The model also helps identify who and what are most valuable today and in the future.

Armed with this information, companies can offer top talent rewards and incentives to keep performance and productivity at peak levels and drive progress. They should also include an assessment of talent against future leadership criteria.

By recognizing employees with the potential to deliver more value in the future, organizations not only reward them for past contributions, but also provide incentives for future initiative and performance. Those who choose to overlook this process risk losing highly skilled employees to competitors.

Benefit depth vs. quality

Some employee benefits are a better fit than others for certain generations, so a robust (but not overwhelming) portfolio is warranted. For example, traditional PPO plans and voluntary benefits such as critical illness are highly valued by more mature employees, while HDHPs and voluntary products like accident insurance are more highly valued by younger generations.

Servicing debt vs. other expenses

Different generations have different types of debt, which plays into how they value various benefits. For example, certain groups have student loans, and others want higher salaries to save for retirement and pay off debt or mortgages prior to leaving the workforce.

Would certain employees be willing to accept a lower salary in exchange for help paying off their student loans, where others might be interested in employer-sponsored 529 plans to help them save for their children’s higher education?

Paid time off vs. retirement

Some workers want more time off; some want more retirement savings. Will employees be willing to sacrifice certain benefits for more or less PTO? Should the employer retirement plan contribution be more skewed to longer service combined with other factors, such as age?

 

Companies that want to recruit and engage a variety of employees should consider creating customized total compensation plans, which are meaningful but don’t interfere with business operations. Employers should then communicate and deliver those packages in ways that each group prefers. Remember, one size does not fit all.

 

Elliot N. Dinkin is the president and CEO of Cowden Associates Inc. Elliot’s strategic approach assists clients in the development of a total compensation benefit package that controls costs, adds efficiencies and enables the employer to attract, retain, motivate and keep employees engaged while meeting company objectives. Through his guidance, employers become more competitive by creating total compensation packages verses viewing benefits in silos.

Clear objectives and creative compensation help recruit top talent

Companies looking to hire top talent need to position themselves as attractive organizations to work for — and be creative with their compensation packages.

“It’s not like it was five years ago when employers controlled the marketplace,” says Tyler Ridgeway, director of Human Capital Resources for Kreischer Miller. “Most ‘A’ players today have multiple opportunities and are spending as much time evaluating a company from a due diligence perspective as the company interviewing them.”

Smart Business spoke with Ridgeway about how a company can best position itself to recruit top talent by being open and honest with candidates during the interview process and offering creative compensation.

What are some of the first steps a company should take to attract ‘A’ players?

If a company is seeking a new or expanded position, it should create a roadmap that clearly defines the requirements and goals of the position so the executive team is on the same page with what the company is looking to attract.

It’s also important to share this plan with the board of directors and trusted advisers — your attorney, banker, accountant and insurance provider. This should be done before going to market. As the organization conducts internal talks with its advisers, it creates an expanded view of people who might fit the criteria.

Once the job specifications are determined and all involved are thinking the same way, the organization should aggressively seek the right people. If the company has done the leg work in the beginning, it is already ahead of the game. As ‘A’ players go through the interview process, they will immediately see a desirable company that has its act together.

What questions should ‘A’ players ask?

Executives should seek companies that have a good ethical leadership team, whose members are all on the same page, and that want to add an executive to take them to the next level. To identify whether a company meets these criteria, executives should ask some pointed questions: What is the leadership team like? Do they get along? Are they rowing in the right direction? Are there articulated strategies on where they want to go? How can I have an impact?

The impact question is critical because there are many talented executives in the marketplace that are not being utilized as effectively as they could be. Perhaps a business owner is trying to stay away from risk. That effort to keep the status quo may lead to an environment in which ‘A’ players feel their contributions make no impact, and they may seek other opportunities in the marketplace.

Are there new trends in compensation packages?

Organizations are focused on total compensation plans and are designing incentive plans that are highly creative.

During the interview process, the best candidates will disclose their total compensation from previous companies, confirm their interest in the position and describe how they can have an impact in this new role.

If a company finds a candidate it likes, it should be willing to go above market levels to hire that candidate. Compensation is not everything, but it is a big part of it. An ‘A’ player will ask for a base salary that is fair for all parties but if he or she is helping drive value, the individual will also expect to participate in that value creation in some capacity.

What other incentives may help draw top talent?

Organizations want to make an attractive offer and want to share the risk with executives. Sharing equity is something that can make owners nervous. One alternative to direct equity interest is a phantom stock plan.

This is a long-term plan that grants an employee the right to receive future compensation in line with the increase in the company’s equity value, but only upon the achievement of specific objectives. Deferred compensation plans like these can be highly effective retention tools.

Insights Accounting & Consulting is brought to you by Kreischer Miller

AOL CEO Armstrong’s compensation dropped in 2011

DULLES, Va., Tue Apr 17, 2012 – AOL Chief Executive Tim Armstrong’s compensation declined to $3.2 million in 2011 from some $15.3 million in the prior year, according to a regulatory filing.

The 41-year-old former Google executive did not receive any stock rewards or options in 2011 and received a base salary of $1 million, which remained unchanged from 2010.

The proxy filing also urged shareholders not to vote for the activist hedge fund Starboard Value’s slate of board nominees.

Starboard, which spun off from Ramius LLC in March 2011, launched a campaign late last year to shake up AOL. The hedge fund holds a 5.3 percent stake in the Internet company and has grown increasingly hostile, proposing its own slate for directors to address what it describes as AOL’s strategic failings.

In a letter fired off to the AOL board, Starboard called for AOL to pursue a sale of certain assets including its patent portfolio.

In the filing, AOL disclosed it was willing to nominate two new independent directors that “were mutually agreeable to the company and Starboard” to avoid a proxy fight. AOL board director Fredric Reynolds later proposed a settlement after Starboard’s stake in the company increased to 5 percent.

After AOL agreed to sell the majority of its patents to Microsoft for $1 billion on April 9, Reynolds again reached out to Starboard CEO and founder Jeffrey Smith to discuss whether they could resolve the dispute.

According to the filing, Smith was willing to reconsider his position only if the company would return all the proceeds of the patent sale to shareholders.

AOL had said it planned to return a “significant portion.” In its conversations with Starboard, AOL said it could not commit to a specific profit amount but it was willing to re-examine some of Starboard’s business strategies.

Starboard rejected AOL’s proposal, the filing said.

Compensation for Wal-Mart CEO Mike Duke dipped last year

BENTONVILE, Ark., Mon Apr 16, 2012 – Wal-Mart Stores Inc. CEO Mike Duke earned $18.1 million last year, down from $18.7 million in the previous year, as sales growth at the world’s largest retailer fell short of its goals.

Wal-Mart also said Google Inc. executive Marissa Mayer would stand for election to the Wal-Mart board at the company’s annual shareholders meeting on June 1. If elected, Mayer would become the sixteenth member of the board.

While the huge Walmart U.S. business finally reversed its prolonged sales slump last year, overall performance and results at both Walmart U.S. and the international unit fell short of the company’s expectations.

Duke’s cash incentive payment in fiscal 2012 fell to just under $2.88 million from $3.85 million a year earlier and $4.8 million in fiscal 2010, Wal-Mart said in a regulatory filing on Monday.

Duke earned 71 percent of his target cash incentive payment for fiscal 2012, down from 97.4 percent in fiscal 2011 and 125 percent in fiscal 2010.

The board’s nomination of Mayer, 36, underscores Wal-Mart’s desire to become a better online and mobile destination for its shoppers. Mayer joined Google in 1999 as its first female engineer and has been its vice president of local and maps since 2010.

“We are on the cusp of a massive transformation in the way people shop in our increasingly connected world,” Wal-Mart Chairman Rob Walton said in a statement. “Marissa’s insights and expertise in the technology and consumer areas are valuable assets to Walmart as we move forward.”