5 Rules for Managing Pay in a Hiring Surge

1. 5 Rules for Managing Pay in a Hiring Surge

2. 22 Today’s Presenter: Ken Gibson SeniorVice President (949) 265-5703 kgibson@vladvisors.com 23201 Lake Center Drive, Suite 207 ⬧ Lake Forest, CA 92630 ⬧ 949-852-2288 www.VLadvisors.com ⬧ www.PhantomStock.com

3. 5 Rules for Managing Pay in a Hiring Surge

4. 44 We’re happy to provide a copy of today’s slides. To open or close the control panel: Click the red arrow For questions during today’s presentation: Use the question area on your control panel Webinar Q: Are the slides available? A: Yes, more info will be provided at the end

5. 55 Take advantage of a one-half hour consulting call with a VisionLink principal at no charge. Indicate interest on final survey. Consultation Offer & Survey Request a copy of our slides and complimentary consultation. We value your input.

6. 66 Post Webinar Intro 5 Minutes:  Who We Are  What We Do  How We Do It

7. 77 23201 Lake Center Drive, Suite 207 Lake Forest, CA 92630 (888) 703 0080 www.vladvisors.com www.phantomstock.com www.bonusright.com  Headquartered in Lake Forest, CA  Founded in 1996  Over 600 clients throughout North America

8. 88 The Reverse COVID-19 Effect  What if your problem isn’t laying people off?  What if your problem is managing a hiring surge due to increased interest in your product?

9. 99 5 Rules Separate Temporary & Permanent 1 KnowYour Philosophy 2 EmphasizeValue Sharing 3 Keep it Simple 4 Make it Agile 5

10. 1010 1. SEPARATE TEMPORARY & PERMANENT Do you have a plan for compensation temporary employees that is different from permanent hires? If so, how is it different? In what ways can it be the same?

11. 1111 Key Questions  What is causing the increased demand?  Is the surge in demand temporary or enduring?  How much of your hiring is tied to the temporary need vs a long-term need?  What percentage of your new employees need to be hourly vs salaried or sub-contracted?  What commitments are you prepared to make now?  What commitments can only be made sometime in the future?

12. 1212 Temporary (Hourly) Focus on safety Pay a market wage Hire enough people Manage work hours Humanize outcomes Provide flexibility Create incentives Communicate Listen

13. 1313 Temporary (Hourly) Monetary Incentives  Spot bonuses  Deadline rewards  Project incentives

14. 1414 Temporary (Salaried or Sub-Contracted)  Pay salary as last resort  Create sub-contractor relationships  Develop performance agreements  Outsource

15. 1515 Performance Agreement  Typically done for executive or high-level management  Participants excluded from company’s incentive plans  Annual “deal” negotiated with CEO or other primary business leader  Deal memorialized on a “deal sheet” ▪ Defines financial, operational & leadership expectations ▪ Defines value of the award that could be generated  Quarterly self-evaluation against performance expectations with primary business leader

16. 1616 Performance Agreement Outcomes:  Threshold for compensable performance is very high ▪ Small or even $0 payouts can occur  High-risk, high-reward—high upside

17. 1717 Opt-In Plans Most Ideal in Small Company or Start-Up Environment  Opt for: ▪ “Higher” salary plus modest incentives ▪ “Low” or no salary and high upside through short and long-term value sharing  Opt-In payments tied to a revenue or profit- sharing formula  Volatility: payments lowered &/or deferred ▪ Deferred payouts made when economics permit  Opt-In periods may differ ▪ Quarterly, semi-annual, annual

18. 1818 Opt-In Plans Outcomes  Owners can limit guaranteed payouts  Employees have options  Highly flexible—can adjust to rapidly & frequently changing economics  Provides a “shared” entrepreneurial experience  Promotes an ownership mindset  “Self-identifies” key performers

19. 1919 Temporary (Salary) Monetary Incentives  Spot bonuses  Deadline rewards  Project incentives

20. 2020 Non-Monetary Incentives (All Temp Employees)  Individual recognition ▪ Use technology to recognize face to face ▪ Recognize for specific actions ▪ Recognize on public/social channels  Gift cards (online) ▪ Inexpensive and immediate  Product discount ▪ Makes employees advocates and creates good will  Permanent position ▪ Creates an incentive for performance  Culture of contribution ▪ Reward employees for donating to charities ▪ Create a contribution platform to facilitate  Be timely ▪ Whatever you do to reward or recognize, don’t wait

21. 2121 2. KNOW YOUR PHILOSOPHY In the current environment, what should be rewarded and how? How should your philosophy differ now than during less chaotic times?

22. 2222 Compensation Philosophy Statement  How value creation is currently defined.  How value is currently shared— and with whom.  How market pay standards currently apply.  How guaranteed pay and value- sharing will be currently balanced.  How short and long-term value- sharing will be currently balanced.  How merit pay is currently defined.

23. 2323 Key Areas to Focus On  Explore and refine “urgent hiring” principles.  Determine priorities for cash and non-cash compensation, as well as benefits.

24. 2424 Then What?  Put it in writing.  Refer to it frequently.  Communicate it…soon!  Emphasize what will be rewarded.  Solidify a sense of partnership.  Create a longer view.

25. 2525 3. EMPHASIZE VALUE SHARING How will you define value creation for your business? How and with whom will value be shared? What measures will determine value- sharing?

26. 2626 Case Study 26

27. 2727 Core Changes Shift from “Incentives” to “Value Sharing”  Took away local measurements driving management incentive plans—all paid on same metrics ▪ “We live together and we die together”  Aligned everyone behind company success ▪ “I call it ‘pay the company first.’ ” 27

28. 2828 Pay the Company First “Basically, up to the company’s operating profit target, all of the profits go to the company; and only after that target is met, do we start funding the incentive pool.” Example: If UL’s target is $80 million--  100% of first $80 in profit goes to company  The next $20 million goes to the incentive pool  From there on, 50/50 between company & incentive pool

29. 2929 Pay the Company First Once value creation is defined, compensation can follow a formula for sharing value in a way that aligns key producers with the company’s business plan and priorities. 29

30. 3030 The Value of Profit Wealth Multiplier Profits Secure Business Reward Employee Results Protect Shareholders

31. 3131 A Sense of Partnership Leads to a Growth Multiple The Value of Profit Wealth Multiplier Profits Protect Shareholders Secure Business Reward Employee Results

32. 3232 Setting Performance Thresholds  Base  Target (budget)  Superior 32

33. 3333 Outcomes, not Methods "You cannot hold people responsible for results if you supervise their methods.“ (Stephen R. Covey) 33 "You cannot hold people responsible for results if you pay them for their methods.“ (VisionLink)

34. 3434 4. KEEP IT SIMPLE How do you effectively reward the short-term outcomes that need to be achieved? How do you balance a focus on short-term vs long-term performance?

35. 3535 Dual Focus Peter Drucker once wrote that the manager’s job is to keep his nose to the grindstone while lifting his eyes to the hills. He meant that every business has to operate in two modes at the same time: producing results today and preparing for tomorrow. (Ken Favaro, Strategy+Business)

36. 3636 One Philosophy. Two Performance Periods. Wealth Multiplier Philosophy We want all stakeholders to participate in the wealth multiple they help create.  Fair  Prudent

37. 3737 Correlated Results. Companion Rewards.  Short-Term focuses on rewarding profit  Long-Term focuses on rewarding business value increase

38. 3838 Central Metric (for funding the plan) Focus on One of These:  Profit  Increase in Profits (% or $)  (Sometimes: Revenue Growth) 38

39. 3939 Setting Payout Thresholds  Base  Target (budget)  Superior 39

40. 4040 Sample Bonus Pool Construction Base Target Superior Profits $1,200,000 $1,500,000 $1,800,000 Bonus Pool $80,000 $150,000 $220,000 % of Profits 6.7% 10.0% 12.2% No bonuses below Base; bonuses rise as you move toward Target and Superior.

41. 4141 Sample Employee Opportunity Table Sam’s Opp (Salary = $100k) Base Target Superior % Opp 5% 10% 15% $ Opp $5,000 $10,000 $15,000

42. 4242 Sample Bonus Pool Construction Base Target Superior Profits $1,200,000 $1,500,000 $1,800,000 Bonus Pool $80,000 $150,000 $220,000 % of Profits 6.7% 10.0% 12.2%

43. 4343 Other Metrics Minimum profit thresholds must be met first. Then…  Department or team metrics  Non-correlated factors (customer retention, customer or client increase, etc.)  Individual performance metrics

44. 4444  Allocation to plan participants contingent on: ▪ Company Performance – Employees should have all or a majority portion of their bonus based on company performance ▪ Org Unit Performance – A portion of an employee’s bonus can be allocated based on department, location, division, or business unit Plan Weighting/Allocation

45. 4545 Plan Weighting/Allocation  Make overall company performance the primary objective (e.g. ~60 - 100%)  Organizational unit success should be secondary objective (e.g. ~40 - 20%)  Weight the overall incentive:

46. 4646 Individual Performance  Trend is to disconnect performance from incentive pay  Performance Management is still important  Managers more likely to be honest about performance if incentives are not directly correlated to performance rating  If performance is deemed “Unacceptable” discretion should be utilized to eliminate incentive payment 46

47. 4747 Plan Discretion What about employees who made special contributions over the course of the year?  Create a discretionary reserve inside of plan funding  Reserved for “exceptional” performers only  Often held at the top of the organization (not cascaded down to individual managers).  Nomination process.  Don’t wait until the end of the year to recognize performance.  Essentially, these are funded “spot” awards

48. 4848 9 Long-Term Value Sharing Alternatives Stock Option Performance Shares Restricted Stock Phantom Stock Option Performance Phantom Stock Phantom Stock Profit Pool Performance Unit Strategic Deferred Compensation

49. 4949 Grant Equity or Not Equity? Full Value or Appreciation Only? Yes Appreciation Stock Option Full Value Performance Based? Yes Performance Shares No Restricted Stock No Reward for Value Increase or Financial Performance? Value Increase Full Value or Appreciation? Appreciation Phantom Stock Option Full Value Performance Based? Yes Performance Phantom Stock No Phantom Stock Financial Performance Appreciation- Performance Based or Employee Directed? Performance Based Reward for Profit/Cash Flow or Other Metrics? Profits Allocation or Objectives Based? Allocation Profit Pool ObjectivesOther Metrics Performance Unit Employee Directed Strategic Deferred Compensation

50. 5050 A Dual Focus Leads to . . . Every employee understanding: ▪ The need to focus on both short and long-term outcomes ▪ The importance of creating “good” profits and not “bad” profits ▪ The need to adopt a shareholder’s mindset about their role

51. 5151 5. KEEP IT FLEXIBLE How can you make sure your pay strategy is agile enough to address current conditions but enduring enough to be relevant when the economy rebounds?

52. 5252 The Need for Pay Agility Compensation Solution Create a rewards strategy that is flexible and combine it with an operational structure that is enduring.

53. 5353 Flexible but Enduring  Look at compensation strategy as you would an investment portfolio.  Individual pay components are your “asset classes.”  As things change, adjust weighting of each asset class.

54. 5454 Develop a Balanced Approach The role of each pay component in relation to others within the comprehensive compensation strategy is coordinated and clear— and reflects the company’s pay philosophy.

55. 5555 Eight Components of Pay Benefits  Core benefits  Executive benefits  Qualified retirement plans  Supplemental retirement plans Compensation  Salary  Performance incentives  Sales incentives  Growth incentives Incentives should be in the form of value sharing.

56. 5656 The Total Compensation Structure Min Mid Max 1 203,531 271,375 339,219 50.0% 100% 50% 50% 5% Yes 5% $11,141 Unlimited Unlimited 15,000 20,000 2 150,078 200,103 250,129 35.0% 75% 50% 50% 5% Yes 5% $11,141 Unlimited Unlimited 10,000 12,500 3 119,497 159,329 199,161 25.0% 50% 100% 0% 5% Yes 5% $11,141 25 5 5,000 8,000 4 102,632 136,843 171,054 20.0% 25% 100% 0% 5% $6,127 25 5 5,000 5 81,293 101,616 121,940 15.0% 5% $6,127 25 5 5,000 6 69,720 87,150 104,580 15.0% 5% $6,127 15 5 7 58,564 73,205 87,846 10.0% 5% $6,127 15 5 8 50,176 62,720 75,264 10.0% 5% $6,127 15 5 9 44,038 51,809 59,580 5.0% 5% $6,127 15 5 10 37,211 43,777 50,344 5.0% 5% $6,127 10 5 11 30,784 36,217 41,649 5.0% 5% $6,127 10 5 12 23,562 27,720 31,878 5.0% 5% $6,127 10 5 13 19,529 22,975 26,421 0.0% 5% $6,127 10 5 14 17,354 20,417 23,479 0.0% 5% $6,127 10 5 Annual Car Allow Grade/ Band Sick Days Salary Range Bonus Target LTIP Target Financial Planning Perk Deferred Comp Elegible Deferred Comp Max Match 401k Match Max % Vacation Days % Phantom Stock FV % Phantom Stock AO Health, Dental, Life

57. 5757 Finding the Right Balance Total Compensation Structure Name Title/Position Tier Salary Short-term Incentive Target Long-term Incentive Target Total Direct Comp H&W Annual Value QRP Annual Value Security Plans Annual Value Total Indirect Comp TRI Jason Smith CEO 1 $ 300,000 $ 120,000 $ - $ 420,000 $ 18,200 $ 8,000 $ - $ 26,200 $ 446,200 Lucy Jones VP Marketing 2 $ 210,000 $ 45,000 $ - $ 255,000 $ 16,200 $ 7,000 $ - $ 23,200 $ 278,200 Rick Miller VP Sales 2 $ 160,000 $ 85,000 $ - $ 245,000 $ 9,200 $ 6,000 $ - $ 15,200 $ 260,200 Janice Johnson CFO 2 $ 195,000 $ 40,000 $ - $ 235,000 $ 10,200 $ 5,000 $ - $ 15,200 $ 250,200 Maria York Director 3 $ 160,000 $ 10,000 $ - $ 170,000 $ 12,200 $ 4,000 $ - $ 16,200 $ 186,200 Frank North Director 3 $ 150,000 $ 10,000 $ - $ 160,000 $ 11,200 $ 3,000 $ - $ 14,200 $ 174,200 Ricardo South Director 3 $ 140,000 $ 10,000 $ - $ 150,000 $ 7,700 $ 2,000 $ - $ 9,700 $ 59,700 Simon Lewis Director 3 $ 130,000 $ 10,000 $ - $ 140,000 $ 8,700 $ 2,500 $ - $ 11,200 $ 151,200 $ 1,445,000 $ 330,000 $ - $ 1,775,000 $ 93,600 $ 37,500 $ - $ 131,100 $ 1,906,100 Can we afford to make these payouts? Should we shift to a longer-term plan?

58. 5858 What is the Right Allocation? Total Rewards Investment (TRI) Allocation TRI looks at each component of pay as a percentage of the total Name Tier Salary STI% LTI% H&W% QRP% SP% TRI Jason Smith 1 67.2% 26.9% 0.0% 4.1% 1.8% 0.0% $ 446,200 Lucy Jones 2 75.5% 21.4% 0.0% 7.7% 3.3% 0.0% $ 278,200 Rick Miller 2 61.5% 53.1% 0.0% 5.8% 3.8% 0.0% $ 260,200 Janice Johnson 2 77.9% 20.5% 0.0% 5.2% 2.6% 0.0% $ 250,200 Maria York 3 85.9% 6.3% 0.0% 7.6% 2.5% 0.0% $ 186,200 Frank North 3 86.1% 6.7% 0.0% 7.5% 2.0% 0.0% $ 174,200 Ricardo South 3 87.7% 7.1% 0.0% 5.5% 1.4% 0.0% $ 159,700 Simon Lewis 3 86.0% 7.7% 0.0% 6.7% 1.9% 0.0% $ 151,200 Salary STI% LTI% H&W% QRP% SI%

59. 5959 Offering Options Sample Position Salary Short-Term Value Sharing Long-Term Value Sharing Total Option A $120,000 $0 $0 $120,000 Option B $100,000 $20,000 $30,000 $150,000 Option C $80,000 $40,000 $80,000 $200,000

60. 6060 Focus on the Future  Here’s the short-term picture  Here’s our vision for the future.  Here’s how we plan to get there.  Here’s the role we need you to perform.  Here are the resources you will be able to use.  Here’s our philosophy about pay and rewards.  Here are the specific pay programs you’ll participate in.  Here’s how our pay programs will work for you if we achieve our plan.

61. 6161 Employee Value Statement Year 1 2 3 4 5 Targeted Results 100% 100% 100% 100% 100% Salary $160,000 $166,400 $173,056 $179,878 $187,177 STVS $64,000 $66,560 $69,222 $71,991 74,871 LTVS (EOY) -- $74,000 $186,000 $311,000 $448,000 401(k) @7% $17,120 $36,123 $57,169 $80,428 $106,086 Total Cash $224,000 $232,960 $242,278 $251,970 $262,048 Wealth Accrual $17,120 $110,123 $243,169 $391,428 $554,086 Total Value $241,120 $567,083 $942,407 $1,342,636 $1,767,343

62. 6262 5 Rules Separate Temporary & Permanent 1 KnowYour Philosophy 2 EmphasizeValue Sharing 3 Keep it Simple 4 Make it Agile 5

64. 6464 Take advantage of a one-half hour consulting call with a VisionLink principal at no charge. Indicate interest on final survey. Request Consultation & Take Survey Request a copy of our slides, report, complimentary consultation and BonusRight demo. We value your input.

65. 6565 www.BonusRight.com www.bonusright.com

66. 6666  New SaaS tool  Build and manage your bonus plan online.  Indicate on survey if you would like to schedule a demo.

67. 6767 www.phantomstock.com www.vladvisors.com Subscribe to our blog!

68. 6868 Special Offer What is an Employee Value Proposition? Request your copy on the final survey.

69. 6969 Q&A

70. 7070 Today’s Presenter: Ken Gibson SeniorVice President (949) 265-5703 kgibson@vladvisors.com 23201 Lake Center Drive, Suite 207 ⬧ Lake Forest, CA 92630 ⬧ 949-852-2288 www.VLadvisors.com ⬧ www.PhantomStock.com ThankYou!

72. 7272

73. 7373

74. VisionLink’s Focus: Help Business Leaders Build and Sustain a High Performance Culture Accelerate performance through pay strategies that transform employees into growth partners.

75. If you do that… • Quality of talent will improve. • Employee engagement will expand. • Performance will be magnified. • Business growth will be accelerated. • Shareholder value will increase.

76. 7676 Today’s Presenter: Ken Gibson SeniorVice President (949) 265-5703 kgibson@vladvisors.com 23201 Lake Center Drive, Suite 207 ⬧ Lake Forest, CA 92630 ⬧ 949-852-2288 www.VLadvisors.com ⬧ www.PhantomStock.com ThankYou!

5 Rules for Managing Pay in a Hiring Surge

Vous êtes en train de lire un aperçu.

Consultez-les par la suite

5 Rules for Managing Pay in a Hiring Surge

Plus De Contenu Connexe

Diaporamas pour vous (20)

Similaire à 5 Rules for Managing Pay in a Hiring Surge (20)

Plus récents (20)