Every company battles to balance the desire to follow trends and the need to remain unique and competitive. Our presenters, Dan Walter and Sam Reeve from Performensation, will discuss how to do just that. The world of compensation is like a box of crayons. Every company has its own color that is a special mix of its corporate strategy, corporate culture and compensation philosophy. Learn how to keep your color separate from the melted brown of generic trends and survey data. This presentation will explain how to: "SWOT your comp" (strengths, weaknesses, opportunities, threats) and deliver what your stakeholders need. Calculate the ROI of your STI and LTI programs. Learn what other companies are planning for 2014. Reeve and Walter will also discuss industry-specific market trends that may drive changes in compensation design, metrics, goals and instruments. Industries to be discussed will include health care medical devices, energy and alternative energy, software and more.

1. Compensation, Evaluation and Evolution:
Set Your Own Trends for 2014
December 10, 2013
©2013 Performensation

2. Presenting
Sam Reeve is a global certified compensation
consultant (CCP, GRP) with 15 years of experience in
Total Reward Strategies. He is an expert in broad-based
compensation and focuses his talents on enhancing
performance through the effective use of incentive and
recognition programs.
SAM REEVE, CCP, GRP
Executive Vice President
TF
1 877 803 9255 ext 702
Office
1 415 625 3088
Mobile
1 970 403 5775
sreeve@performensation.com
LinkedIn: SamReeve
Twitter: @SamReeve3
Prior to joining the firm, Sam has worked in the
corporate compensation functions of notable firms such
as BlackRock, McKesson and Automatic Data
Processing (ADP).
Sam currently lives in Colorado and aside from his
professional life, enjoys numerous outdoor activities
with his 4 children and wife, Jessica.
Sam has a degree in Finance and Economics from
California State University, Sacramento.
©2013 Performensation
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3. Presenting
Dan has more than 19 years of experience focused on
aligning compensation to corporate strategy and
culture. His work includes both executive and broadbased programs and he has provided end-to-end
solutions for private and public companies both within
the United States and abroad.
DAN WALTER, CEP
President and CEO
TF
Office
Mobile
1 877 803 9255 ext 700
1 415 625 3406
1 917 734 4649
dwalter@performensation.com
Skype: Performensation
Twitter: Performensation
His work with start-ups and established Fortune 100
companies provides his clients with an unique
perspective on compensation issues.
Dan is also a highly sought after speaker on a broad
range of topics. He is board member for the National
Center for Employee Ownership and the Institute for
Human Resources, an award winning member of the
National Association of Stock Plan Professionals and an
active member of World at Work, Global Equity
Organization and the Society for Certified Equity
Professionals.
©2013 Performensation
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4. Define Your Compensation “Color”
Every company is has its own color for compensation
Your unique color is defined by
Strategy Industry, culture, philosophy, history, goals
This color defines the trends that work for you
©2013 Performensation
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5. Most Data and Trends Melt All Colors Into a Blurred Mess
Trends are are generic market data
Trends are about choosing your specific path from
among the blurred colors available
You create your own trends by understanding your
unique color and applying your compensation
expertise the the many shades that color has to offer
©2013 Performensation
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6. What is the industry saying is “hot” right now?
Merit increases, on average of 2.6-3.1%.
BUT high performers are being reported at 4.5-5%
©2013 Performensation
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7. What is the industry saying is “hot” right now?
Variable Pay as a component of total compensation is
remaining flat at virtually all levels.
BUT Pay for performance is on the list of high priority
items for a majority of companies.
HOW CAN THIS MAKE SENSE?
©2013 Performensation
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8. What is the industry saying is “hot” right now?
Diminishing use of stock options.
BUT this is mainly for companies in the Fortune 250, in
large part because of:
1. Concerns from ISS and other Institutional investors
2. Rising stock prices have bitten into potential future gains
©2013 Performensation
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9. What is the industry saying is “hot” right now?
Growing Use of RSUs.
BUT this is often communicated incorrectly since these
are often performance units in disguise.
©2013 Performensation
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10. What is the industry saying is “hot” right now?
Growing use of Performance Units.
BUT currently most at the very top of most companies.
©2013 Performensation
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11. What is the industry saying is “hot” right now?
TSR – Total Shareholder Return
TSR as the main performance metrics for performance
unit plans.
BUT TSR already losing favor in Europe as a standalone metric. Combining with financial or operational
metrics is the way to get ahead of the curve.
©2013 Performensation
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12. What is the industry saying is “hot” right now?
Growth in Realizable and Realized Pay as a metric
communicate executive compensation compared to
peers.
BUT most companies are not using the same
methodology as ISS which gives rise to new conflicts
and disagreements
©2013 Performensation
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13. What is the industry saying is “hot” right now?
Better alignment between STI and LTI target levels and
actual compensation delivered.
Pricing low and paying high is far less accepted than in
the past
©2013 Performensation
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14. So, if the trends are not black and white…?
How do we
define our own
trends?
©2013 Performensation
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15. Critical Skill 1 – Understand How to SWOT Your Comp Team
©2013 Performensation
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16. SWOT Your Comp Team
The Environment for
Rewards is Changing
We need to Adapt
Start by evaluating your
teams ability to service
your clients
©2013 Performensation
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17. Steps
1) Understand the Changing Environment
2) Consider your Circle of Influence
3) Update your Service
Delivery Model
4) SWOT your Comp Team
©2013 Performensation
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18. Adapt to the Changing Environment
What should your
Service Delivery Model
look like?
?
?
?
©2013 Performensation
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19. Defining Your Circle of Influence
Who provides direction?
Who do you answer to?
©2013 Performensation
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20. The Circle of Influence
Internal
The
Comp Team
Circle of
Influence
©2013 Performensation
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21. The Circle of Influence
Future
Candidates
Shareholders
Internal
and
External
Media
The
Comp Team
Circle of
Influence
Publications
Associations
©2013 Performensation
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22. Identify your Clients
Who currently uses
the services of the
Comp Team?
©2013 Performensation
The
Comp Team
Circle of
Influence
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23. Identify your Clients
Who currently uses
the services of the
Comp Team?
And
©2013 Performensation
The
Comp Team
Circle of
Influence
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24. Identify your Clients
Who currently uses
the services of the
Comp Team?
And
Who isn’t leveraging
the Comp Team that
would benefit?
©2013 Performensation
The
Comp Team
Circle of
Influence
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25. Identify your clients
Participants of your
Current Programs
Such as the:
• Salary Program
• Short Term Incentives
• Long Term Incentives
• Recognition
?
?
?
Participants
©2013 Performensation
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26. Identify your clients
Managers
Need Support with:
• Pay for Performance
• Retention
• Reporting
?
?
?
Managers
©2013 Performensation
Participants
26

27. Identify your clients
Finance
a reciprocal relationship
Share reporting:
• Comp Accruals
• Budgeting
• Forecasting
?
Finance
?
Managers
©2013 Performensation
?
Participants
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28. Identify your clients
Recruiting
Need support with:
• Competitive Comp for
Jobs
• Complex Offers
• Informing New Hires
Recruiting
Finance
?
?
Managers
©2013 Performensation
?
Participants
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29. Identify your clients
HR Advisors
a reciprocal relationship
Such as:
• Comp Program roll-out
• Critical Talent
• Benchmarking
Recruiting
Finance
?
?
Managers
©2013 Performensation
HR
Advisors
?
Participants
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30. Identify your clients
Vendors of your Current
Programs
Such as:
• Relationship Management
• Upgrades
• Participant Support
Recruiting
Finance
?
?
Managers
©2013 Performensation
HR
Advisors
?
Vendors
Participants
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31. Identify your clients
Business Leaders
Interested in:
• Clear Guidance
• Effective Pay for
Performance
• Cost Control
Business
Leaders
Recruiting
Finance
Monitor Stakeholders
?
?
Managers
©2013 Performensation
HR
Advisors
?
Vendors
Participants
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32. Defining Your Service Delivery Model
What tools do you need to succeed?
Who is involved in providing data and resources?
©2013 Performensation
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33. Review Your Service Delivery Model
Service Delivery
Model
What functions
are needed
to deliver your
Products and Services
?
?
?
©2013 Performensation
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34. Review Your Service Delivery Model
Program Management
Managers want to
leverage programs to
motivate and engage
Participants want to be
compensated
Business
Leaders
HR
Advisors
Recruiting
Program
Management
Finance
Vendors are needed to
provide expertise
Managers
©2013 Performensation
Vendors
Participants
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35. Review Your Service Delivery Model
Reporting
Business intelligence is
critical
Business
Leaders
HR
Advisors
Recruiting
Finance
Managers
©2013 Performensation
Vendors
Reporting
Participants
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36. Review Your Service Delivery Model
Consulting
Expertise where it is
needed
Business
Leaders
HR
Advisors
Recruiting
Consulting
Finance
Managers
©2013 Performensation
Vendors
Participants
36

37. The New Service Delivery Model
We have a plan…
Business
Leaders
…but can we deliver?
Recruiting
Consulting
Finance
Reporting
Managers
©2013 Performensation
HR
Advisors
Program
Management
Vendors
Participants
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38. Plan for Success
The company
depends on the
products and services
that your team provides,
so …
Consulting
Reporting
©2013 Performensation
Program
Management
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39. Plan for Success
Know the skills
that are required to
support the
Service Delivery Model
Consulting
Reporting
©2013 Performensation
Program
Management
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40. Assess your Team
Does your team
have the necessary
Knowledge,
Skills and
Abilities?
©2013 Performensation
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41. Assess your Team
Team Member impact
is a combination of:
Functional Knowledge
Functional
Knowledge
Such as:
Worksheets, Executive Comp,
Stock Administration, etc.
Soft Skills
Soft Skills
Such as:
Team Work, Influence,
Presence, etc.
EXPERIENCE
©2013 Performensation
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42. SWOT Time
Where do you reinforce?
Where to you rebuild?
Where do you focus your defenses?
Where are your greatest potential successes?
©2013 Performensation
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43. The SWOT Analysis
Strengths
Weaknesses
Opportunities
Threats
Organize your findings
into a SWOT analysis
Provides clarity that can
lead to an improved
service standard
©2013 Performensation
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44. The SWOT Analysis
Strengths
Opportunities
Internal
Weaknesses
Factors that
can be
Controlled
Threats
©2013 Performensation
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45. The SWOT Analysis
Strengths
Weaknesses
Opportunities
Uncontrollable
Factors
but can
position for success
Threats
External
©2013 Performensation
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46. The SWOT Analysis
Strengths
Weaknesses
Opportunities
Threats
Build
On
Strengths
©2013 Performensation
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47. The SWOT Analysis
Strengths
Weaknesses
Limit
Weaknesses
Opportunities
Threats
©2013 Performensation
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48. The SWOT Analysis
Example:
STRENGTHS:
Reporting
Dynamic Tools
Response Time
WEAKNESSES:
Consulting
Problem Solving
Reactive
OPPORTUNITIES:
New PM System
New Sales Team
THREATS:
Regulation
Limited Bonus Pool
Talent Departure
©2013 Performensation
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49. Take Action
If your team has gaps in
Knowledge, Skills and
Abilities:
Consider dedicating
money and effort to
Training or
Acquiring the Right Talent
©2013 Performensation
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50. So, I know what I am good (and bad) at…
Again…How do
we define our
own trends?
©2013 Performensation
50

51. Calculating ROI – Cost-Benefit Analysis
Return on Investment is simple to talk about in
theory, but can it be done in reality?
YES
Include a Cost-Benefit Analysis in
every major decision
©2013 Performensation
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52. Calculating ROI – What are you Measuring?
Be clear about what you are spending and what you
expect to get in return
Attraction. Know what is costs to hire a new employee. Time,
marketing, fees, relocation, replacement grants etc…
Motivation. Understand how much it takes to communicate and
support any pay for performance programs, equity compensation
programs and sales compensation.
Retention. Knows what it costs to get an employee to the expected
productivity level. Understand how much it costs YOUR company to
replace someone who leaves. The industry averages are irrelevant.
You need to know this for each type of role at your own company.
Don’t forget systems…
©2013 Performensation
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53. Performing a CBA
SECTION I: Capture Costs and Benefits
• Current Processes Vs. Proposed Solution
• Costs are segmented into human capital costs and economic costs
• Current Technology Vs. Proposed Technology
–Captures costs of the current solution(s)
–Captures costs of the proposed solution(s)
–Difference of proposed to current (if positive) is cost benefit of the
proposed method
SECTION II: Cost/Benefit Analysis (CBA)
• Human capital and participant impact benefits of the proposed
project
• Economic analysis of the proposed project

54. ESTIMATION OF COSTS (Cont.)
Types of Costs:
• Upfront Costs: One time, spent right away
• Recurring Costs: Keep project operating over time
• Sunk Costs: Money already spent; not
considered in analysis of project
• Disposal Costs: Money spent to retire a
project as opposed to
• Residual Value: Money returned to you at
conclusion of project lifecycle

55. Net Present Value
Net Present Value
• Tells you whether the project represents a net gain or a net loss
over the project lifecycle
ZERO NPV:
–The project benefits offset the costs
NEGATIVE NPV:
–The project will cost more than it will bring back in benefits
POSITIVE NPV:
–The project’s benefits offer a net gain
C/B Ratio (Discounted Benefits/ Discounted Costs)
• Tells us how much you will get back in benefits. Helpful in
determining if project will reach the breakeven point (ratio of 1) for
the project lifecycle

56. Cost/Benefit Calculation
Ratio of 1 – The project benefits equal the costs for the
project lifecycle
Ratio less than 1 – Cost outweighs the benefits
Ratio greater than 1 – The benefits outweigh the costs
The payback period is defined
as the number of years and/or
months it will take to recover
the costs involved in the
project

57. PAYBACK PERIOD
Benefits
Cumulative $
$40,000
(Gross Return)
Costs
$20,000
(Startup Costs)
NOW
YR 1
YR 2
YR 3
YR 4
YR 5

58. Calculating ROI – STI Programs
Your investment in STI is not just the dollars you
budget as compensation costs.
You must include the direct impact on improved
company performance, including
intangibles
A complete ROI will look into the
past STI plans and any direct or
extrapolated results that can be
tied to pre and post-STI roll-out.
Don’t assume cause and effect,
prove it.
©2013 Performensation
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59. Calculating your ROI – LTI/Equity Programs
LTI programs require multiple measurements
Cost of creating the program. Just because a new type of program is trending
upwards doesn’t mean it makes sense for your company to have that program.
The creation and implementation costs of a new plan, may not be worth it.
Cost of the awards, per accounting methods.
– Variable costs, cash accounting
– Cost of equity (dollars and political) at time of grant, Vs. When it is booked
by the company, Vs. When payout is made to the individual, Vs. Planned
payout as a component of comp philosophy
Cost of communication.
– Initial roll-out
– On-going systems, helpful reports and web access
– Regular re-education, dealing with lower stock prices, poor company
performance, poor industry performance
Administration costs
©2013 Performensation
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60. Merit Increases – Define Your Own Trend
Retrain your managers to understand what is meant by “merit”?
Understand your culture and if your define your company as “high
performance” make sure you allocate better than average
increases to top performers before allocating increases to average
and low performers
Redefine your compensation philosophy if you need to. Everyone
can’t target the 50th percentile and be competitive.
©2013 Performensation
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61. Variable Pay – Define Your Own Trend
Don’t be afraid to push variable compensation deeper
into your organization.
BUT make sure you provide the training, support and
systems to make the program successful.
©2013 Performensation
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62. Stock Options – Define Your Own Trends
If your stock price is strong, don’t be afraid to continue
using options.
If stock options are no longer an option consider
pushing performance units deeper into the
organization. (once again, ensure you provide the
requisite training, support and systems)
©2013 Performensation
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63. RSUs – Define Your Own Trends
RSUs are a great, stable element of LTI
3 Year vesting is the average, but isn’t a requirement.
Consider shorter and longer vesting periods
Don’t get locked into RSUs if your stock price is rising
and your overhang allows for more leveraged tools.
©2013 Performensation
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64. Performance Units – Define Your Own Trends
Performance units can offer the downside protection of
RSUs and the upside leverage of stock options. Don’t
be afraid the explore these beyond the C-Suite
Take the time to do the analytical work before you
finalize your metrics and goal levels.
Don’t jump in the pool without some
professional assistance.
Start soon, but evolve at a careful pace.
The biggest problem is poor design and
modeling before roll-out.
©2013 Performensation
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65. TSR – Define Your Trends
Combine TSR with internal financial or operational
metrics to get ahead of the curve.
Understand the how and why of any peer group
chosen.
Does it work with shareholder expectations?
Is it big to survive the entire measurement period?
Can you get the data when you need it?
©2013 Performensation
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66. Realizable Pay – Define Your Own Trends
Everyone should do a Realizable Pay calculation, but
not everyone should include it in their proxy.
Understand the key differences between your model
and the model used by your major investors.
This is a first line of analysis when problems with executive pay
are identified. Don’t be caught unaware.
©2013 Performensation
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67. STI/LTI Alignment – Define Your Own Trends
Don’t guess about your company strategy. Get
confirmation from your executive team.
Make sure you model Best, Worst, Mathematical and
Expected Case scenarios. Wild pay swings and
“lowball targets” are no longer acceptable
©2013 Performensation
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68. Reminders
KNOW YOUR
STRENGHTHS
AND
WEAKNESSES
KNOW YOUR
UNIQUE
COLOR
Business
Leaders
HR
Advisors
Recruiting
KNOW YOUR
SERVICE
DELIVERY
MODEL
Consulting
Finance
Reporting
Managers
Program
Management
Vendors
KNOW YOUR
COSTS AND
BENEFITS
Participants
©2013 Performensation
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69. SAM REEVE, CCP, GRP
Executive Vice President
DAN WALTER, CEP
President and CEO
TF
1 877 803 9255 ext 702
Office
1 415 625 3088
Mobile
1 970 403 5775
TF
1 877 803 9255 ext 700
Office
1 415 625 3406
Mobile
1 917-734-4649
sreeve@performensation.com
SamReeve
@SamReeve3
dwalter@performensation.com
DanWalter
@Performensation
Please visit our website at
www.performensation.com
Twitter: www.twitter.com/performensation
LinkedIn: http://www.linkedin.com/company/performensation
Facebook: https://www.facebook.com/pages/Performensation-Consulting/371636619516008?fref=ts
Slideshare (presentations and documents): http://www.slideshare.net/performensation
Quora (Q&A): http://www.quora.com/Dan-Walter
514 Precita Ave, Suite 100, San Francisco, CA 94110
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70. We Align Compensation with Corporate Strategy and Culture
Performensation was founded in 2006 in response to the demand for more strategic and
effective compensation programs.
Successful compensation requires four key elements. Each component must be carefully
crafted to your unique goals and culture.
Vision: We understand where you are headed and have the skills to get you there. We are
respected throughout the industry for our forward-thinking perspective and our ability to execute
on it.
Foundation: Long-term solutions are based on evidence, not founded on gimmicks or fads. They
are built to allow for adjustments to organizational and market conditions. Your program’s
foundation must reflect your company and the goals it is designed to support.
Design: A great program combines creativity with practicality. We utilize our broad and deep
understanding of rules, regulations, processes and providers to ensure your program delivers
high- performance results. Our designs are easy to understand, compliant and effective.
Communication: Participants only value what they understand. Communication must be built in
to every step of the process. We ensure that all program elements are relevant and make sense
to your targeted audience.
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