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The 3 Parts of an Irresistible Pay Offer

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The 3 Parts of an Irresistible Pay Offer

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Let’s face it, it is becoming harder and harder to attract the best talent. And without great people, you’ll never achieve a high-performance culture. As a result, your growth ambitions will be left unfulfilled. In short, it is critical to have an “irresistible” pay offer.

In this presentation, you will learn:

What a well-crafted pay philosophy should address and why it matters to the people you are trying to attract.
How to design a pay approach that appeals to the millennial employees you need to recruit.
Why a compensation strategy rooted in a value-sharing model is essential to an irresistible pay offer.
How top talent evaluates your compensation plan—and what they want it to help them achieve.
Why “how” you pay top producers is more important than “how much” you pay them.
How to create a rewards plan that offers unlimited earnings potential and pays for itself.

To watch the recording, visit https://www.vladvisors.com/webinars/the-3-parts-of-an-irresistible-pay-offer

Let’s face it, it is becoming harder and harder to attract the best talent. And without great people, you’ll never achieve a high-performance culture. As a result, your growth ambitions will be left unfulfilled. In short, it is critical to have an “irresistible” pay offer.

In this presentation, you will learn:

What a well-crafted pay philosophy should address and why it matters to the people you are trying to attract.
How to design a pay approach that appeals to the millennial employees you need to recruit.
Why a compensation strategy rooted in a value-sharing model is essential to an irresistible pay offer.
How top talent evaluates your compensation plan—and what they want it to help them achieve.
Why “how” you pay top producers is more important than “how much” you pay them.
How to create a rewards plan that offers unlimited earnings potential and pays for itself.

To watch the recording, visit https://www.vladvisors.com/webinars/the-3-parts-of-an-irresistible-pay-offer

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The 3 Parts of an Irresistible Pay Offer

  1. 1. The 3 Parts of an Irresistible Pay Offer
  2. 2. 22 Today’s Presenter: Ken Gibson SeniorVice President (949) 265-5703 kgibson@vladvisors.com 7700 Irvine Center Drive, Suite 930 ⬧ Irvine, CA 92618 ⬧ 949-852-2288 www.VLadvisors.com ⬧ www.PhantomStockOnline.com
  3. 3. 33 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
  4. 4. 44 Take advantage of a one-hour consulting call with a VisionLink principal at no charge. Indicate interest on closing poll. Consultation Offer & Poll Request a copy of our slides and complimentary consultation. We value your input.
  5. 5. 55 Post Webinar Intro 5 Minutes:  Who We Are  What We Do  How We Do It
  6. 6. 66 7700 Irvine Center Dr., Ste. 930 Irvine, CA 92618 (888) 703 0080 www.vladvisors.com www.phantomstockonline.com www.bonusright.com  Headquartered in Irvine, CA  Founded in 1996  Over 500 clients throughout North America
  7. 7. VisionLink’s Focus: Help Business Leaders Build and Sustain a High Performance Culture Accelerate performance through pay strategies that transform employees into growth partners.
  8. 8. 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.
  9. 9. 99 Today’s Agenda  The Need for Irresistible  The Irresistible Organization  Irresistible and Total Rewards  The Talent Landscape ▪ The Millennial Factor  The Three Parts of an Irresistible Pay Offer ▪ A Clear Philosophy ▪ Value Sharing ▪ Unlimited Earnings Potential  The Employer Brand Strategy
  10. 10. 1010 Today’s Agenda  The Need for Irresistible  The Irresistible Organization  Irresistible and Total Rewards  The Talent Landscape ▪ The Millennial Factor  The Three Parts of an Irresistible Pay Offer ▪ A Clear Philosophy ▪ Value Sharing ▪ Unlimited Earnings Potential  The Employer Brand Strategy
  11. 11. 1111 So…Why the Need for an Irresistible Pay Offer?
  12. 12. 1212 Why You Need to Worry “A January 2018 survey of 1,000-plus C-suite executives found that attracting and retaining talent is their number-one concern, outranking anxiety over the threat of a global recession, trade war, and even competitive disruption.” (Moneyball for Business, Fast Company, September 2018, Austin Carr)
  13. 13. 1313 Why You Need to Worry “The US broke many long-standing employment and labor records in 2018, with the effects rippling through all business verticals nationwide. With the 2008 recession now 10 years behind us, the 2018 economy showed strong jobs growth and shrinking unemployment. This is good news for job candidates who are looking to upgrade their jobs. For businesses, however, last decade’s hiring strategies won’t work anymore. The talent pool is shrinking, and updated strategies are a must. “In a talent shortage, candidates (not employers) have the power to dictate wages, benefits, and job content. “Despite high demand, only 50% of employees feel like their wages are competitive with market rates.” (Don’t Panic, but the Talent Pool is Shrinking,” Blue Signal, September 25, 2018)
  14. 14. 1414 Why You Need to Worry “Nearly 70% of business leaders participating in a new global survey said the current talent pool is shrinking. As a result, the competition for talent has increased, forcing employers to change their recruiting strategies.” (“Study: Shrinking Talent Pool Has Recruiters shifting Strategies,” HR Dive, October 5, 2018, Valerie Bolden-Barrett)
  15. 15. 1515 Therefore, What? In a talent market that has a shrinking pool of skilled labor, where will employers look for new talent? No one can afford to passively wait until the right talent appears. They have to proactively pursue the people they need.
  16. 16. 1616 Conclusions  The talent market is highly competitive.  Companies are at risk if they ignore current realities.  Skilled workers are in the driver’s seat.  Former employee value propositions are ineffective.
  17. 17. 1717 The Irresistible Organization …The employee-work contract has changed: People are operating more like free agents than in the past. In short, the balance of power has shifted from employer to employee, forcing business leaders to learn how to build an organization that engages employees as sensitive, passionate, creative contributors. We call this a shift from improving employee engagement to a focus on building an irresistible organization. Deloitte 2015 Study & Report
  18. 18. 1818 The Irresistible Organization
  19. 19. 1919 Where is Compensation? Deloitte: “A hygiene issue.”
  20. 20. 2020 Why Do People Leave? Ceridian Report: 2018-19 Pulse of Talent “Not surprisingly, financial compensation is the leading reason cited by all age segments for leaving their last job…However, it’s not all about the paycheck.” 28%--I didn’t make a good salary/good pay 14%--My work was not interesting/I didn’t like it 13%--I was not respected 12%--I had no opportunities to take on additional responsibilities/tasks 12%--I had a poor relationship with my manager
  21. 21. 2121 Key Consideration "If you aren't talking with your employees about pay, chances are that they're talking to each other and creating their own story of what [the company's] compensation policy is. That's not a good thing.“ (Aubrey Bach, senior manager of editorial marketing at PayScale)
  22. 22. 2222 Total Rewards Approach Compelling Future PositiveWork Environment Opportunities for Personal and Professional Growth Financial Rewards
  23. 23. 2323 Financial Rewards  There is a philosophy that guides pay decisions and I relate to it.  There is a mechanism for sharing value with those who help produce it.  I have some control over how much I can earn if I produce.  I feel a sense of partnership with ownership.
  24. 24. 2424 Understand the Employees’ View of Pay How do employees look at compensation and what matters to them?
  25. 25. 2525 6 Reasons Employees Care About Pay Personal 1. Lifestyle & Wealth Accumulation 2. Career Measurement 3. Contribution Ambitions Business 4. Roles, Expectations & Priorities 5. Partnership 6. Continuity & Fairness
  26. 26. 2626 Total Rewards Approach Compelling Future Purpose PositiveWork Environment Autonomy Opportunities for Personal and Professional Growth Mastery & Purpose Financial Rewards Partnership
  27. 27. 2727 The Talent Landscape The Emergence of the Millennial Workforce
  28. 28. 2828 The Highest Percentage of the Workforce
  29. 29. 2929 Who Are Millennials?
  30. 30. 3030 Launchers  Young professionals at the start of their careers.  Just left the university or are within their first few years of graduating.  Yours is their initial or perhaps second career-related job.  Most of them are single.
  31. 31. 3131 Accelerators  Have had some experience with more than one company  Are now trying to settle in with an organization where they can rise in ability, recognition, contribution and influence.  Most still single but a growing number are married or have life partners and are starting families.
  32. 32. 3232 Catalysts  Entering or are well into their 30s  Have gained meaningful experience and possess unique abilities.  Able to affect significant (positive) change in an organization  Companies are competing for their talents.  They have leverage and are in a position to negotiate.  Many married and have children. Julia Hartz, Eventbrite
  33. 33. 3333 Utah Business Utah Profile  Silicon Slopes  Within 40 miles ▪ 3 Major Universities ▪ 90,000 students  Within 120 miles ▪ 5 Major Universities ▪ 135,000 students
  34. 34. 3434 Utah Business Article MILLENNIALS KEEP QUITTING THEIR JOBS— BUT THEY DON’T WANT TO Your employees are searching for meaning in their careers, and if they don’t find it with you they’ll continue their quest elsewhere. (Kelsie Forman)
  35. 35. 3535 Total Rewards Approach Compelling Future Purpose PositiveWork Environment Autonomy Opportunities for Personal and Professional Growth Mastery & Purpose Financial Rewards Partnership
  36. 36. 3636 The 3 Parts of an Irresistible Pay Offer 1. A Clear Pay Philosophy 2. A Value-Sharing Methodology 3. Uncapped Earnings
  37. 37. 3737 A Clear Pay Philosophy Pay Philosophy: A written statement of what the company is willing to “pay for.” Should be tied to value creation.
  38. 38. 3838 Compensation Philosophy Statement  How value creation is defined.  How value is shared—and with whom.  Market pay standards.  How guaranteed pay and value- sharing will be balanced.  How short and long-term value- sharing will be balanced.  When or if equity will be shared.  How merit pay is defined.
  39. 39. 3939 Old School Defensive Wealth Creation Wealth Multiplier 39 Pay Philosophy Evolution
  40. 40. 4040 Wealth Multipliers vs. Wealth Creators Wealth Creators  Profitability focus  Recruit to skills and experience  Pay is an expense to be managed  Salaries and total pay should be “at market”  “Pay-for- performance” Wealth Multipliers  Accelerate value creation  Recruit premier talent that fits performance framework  Pay is an investment that should produce a growing return  Market pay for bench marking but pay philosophy drive comp strategy  Sharing value with value creators.
  41. 41. 4141 The Value of Profit Wealth Multiplier Profits Future Business Employees Shareholders
  42. 42. 4242 A Sense of Partnership Translates to a Growth Multiple The Value of Profit Wealth Multiplier Profits ShareholdersFuture Business Employees
  43. 43. 4343 Value Sharing Methodology
  44. 44. 4444 Create a Balanced Pay Strategy The role of each pay component in relation to others within the comprehensive compensation strategy is coordinated and clear.
  45. 45. 4545 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.
  46. 46. 4646 Pay that Impacts Business Growth 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.
  47. 47. 4747 Salary Performance Incentives Sales Incentives Growth Incentives Core Health & Welfare Plans Executive Benefit Plans Qualified Retirement Plans Nonqualified Retirement Plans Salaries Competitive with market standards? Tied to strong performance management process (merit)? Managed within a flexible but effective structure? Performance Incentives Tied to productivity gains? Clear, achievable and meaningful? Self-financing? Sales Incentives Challenging yet achievable? Reinforcing the right behaviors? Differentiating your offering? Growth Incentives Linked to a compelling future? Supporting an ownership mentality? Securing premier talent? Core Benefits Responsive to today’s employee marketplace? Allocating resources where most needed? Evaluated to eliminate unnecessary expense? Executive Benefits Flexible enough to address varying circumstances? Communicating a unique relationship? Reducing employee tax expense? Qualified Retirement Plans Giving employees an opportunity to optimize retirement values? Operated with comprehensive fiduciary accountability? Avoiding conflicts and minimizing expenses? Nonqualified Retirement Plans Optimizing tax-deferral opportunities? Aligning long-term interests of employees with shareholders? Structured to receive best possible P&L impact? An Aligned Compensation Strategy
  48. 48. 4848 Agile but Enduring
  49. 49. 4949 Structured Flexibility  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.
  50. 50. 5050 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
  51. 51. 5151 Balanced Value Sharing "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 Navarro, Strategy + Business)
  52. 52. 5252 1 Philosophy, 2 Rewards Periods 1. Short-Term Performance (12 months or less) 2. Long-Term Performance (over 12 months)
  53. 53. 5353 1 Philosophy, 2 Rewards Periods 1. Short-Term Performance (12 months or less) Focus: Reward Profits or Profitability 2. Long-Term Performance (over 12 months) Focus: Reward Business Growth
  54. 54. 5454 Performance Incentives (Value-Sharing)
  55. 55. 5555 Basic Construct  All employees are told they will share in the creation of profits  Every employee has a defined incentive opportunity aligned to forecasted company results ▪ Base – Minimum performance ▪ Target - Forecast ▪ Superior - Overachievement
  56. 56. 5656 Growth Incentives (Value Sharing)
  57. 57. 5757 Select the Right Plan Type Stock Option Performance Shares Restricted Stock Phantom Stock Option Performance Phantom Stock Phantom Stock Profit Pool Performance Unit Strategic Deferred Compensation
  58. 58. 5858 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
  59. 59. 5959 Millennial Segments Launchers Area Orientation Cash Flow/Standard of Living • Pay expectations still being formed • Modest needs • Competitive salary and mentoring Risk Protection • Basic needs • Don’t want to pay anything Retirement • Small or little concern VS/Wealth Accumulation • More concerned about money for this weekend • Short-term preferred over long-term
  60. 60. 6060 Millennial Segments Accelerators Area Orientation Cash Flow/Standard of Living • Context: • Experience • Peer Pay • Life Responsibilities • College Debt Risk Protection • Adequacy of coverage— family focus • Cost sensitive Retirement • Growing Focus VS/Wealth Accumulation • Emphasis on increased cash flow • Short-term preferred over long-term
  61. 61. 6161 Millennial Segments Catalysts Area Orientation Cash Flow/Standard of Living • Prefer median of market pay but with high upside potential Risk Protection • Want flexibility and options • Maximum Control Retirement • Two areas of focus: • Retirement accumulation • Current tax savings • Deferred compensation VS/Wealth Accumulation • Large area of emphasis • Focus on long-term opportunity • Mirror owner opportunity
  62. 62. 6262 Unlimited Earnings Potential Focus on Productivity Profit
  63. 63. 6363 Example: Item Amount Capital Account $20,000,000 Cost of Capital 12% Capital Charge $2,400,000 Operating Income $10,000,000 Productivity Profit $7,600,000 Total Rewards Investment $25,000,000 ROTRI™ Return on Total Rewards Investment 30.4% (ROTRI™ = Productivity Profit/Total Rewards Investment) 63
  64. 64. 6464 Example: Item Figure Capital Account $20,000,000 Cost of Capital 12% Capital Charge $2,400,000 Operating Income $10,000,000 *Productivity Profit $7,600,000 Total Rewards Investment $25,000,000 ROTRI™ 30.4% (ROTRI™ = Productivity Profit/Total Rewards Investment) *Variable Pay Plans (Value Sharing) are financed from Productivity Profit 64
  65. 65. 6565 Focus on Your Employer Brand
  66. 66. 6666 What is an Employer Brand? The perception employees, future employees and the community hold of your company. You don’t get to decide what your brand is. Others determine it. While you don’t get to decide what your brand is, you can decide what you want it to be. CEOs must lead that effort. Employer branding is largely a marketing effort. It is not an HR function.
  67. 67. 6767 Build an Employer Brand Strategy As the global economy picks up, there is growing concern among CEOs about finding and keeping the best talent to achieve their growth ambitions. Different surveys show that in 2014, 36% of global employers reported talent shortages, the highest percentage since 2007, and in a more recent 2015 survey, 73% of CEOs reported being concerned about the availability of key skills. So how can companies compete effectively in this new war for talent? First and foremost, it’s time for leaders to focus on strengthening their organizations’ employer brands. (“CEOs Need to Pay Attention to Employer Branding,” Harvard Business Review, May 11, 2015, Richard Mosley)
  68. 68. 6868 The 3 Parts of an Irresistible Pay Offer 1. A Clear Pay Philosophy 2. A Value-Sharing Methodology 3. Uncapped Earnings
  69. 69. 6969 Post Webinar Intro 5 Minutes:  Who We Are  What We Do  How We Do It
  70. 70. 7070 www.BonusRight.com www.bonusright.com
  71. 71. 7171  New SaaS tool  Build and manage your bonus plan online.  Indicate on survey if you would like to schedule a demo.
  72. 72. 7272 www.phantomstockonline.com www.vladvisors.com Subscribe to our blog!
  73. 73. 7373 Free Report: What is the Purpose of Incentive Compensation? Request your copy on the final survey
  74. 74. 7474 Please Participate in our Poll
  75. 75. 7575 Q&A
  76. 76. 7676 Today’s Presenter: Ken Gibson SeniorVice President (949) 265-5703 kgibson@vladvisors.com 7700 Irvine Center Drive, Suite 930 ⬧ Irvine, CA 92618 ⬧ 949-852-2288 www.VLadvisors.com ⬧ www.PhantomStockOnline.com ThankYou!
  77. 77. 7777 Post Webinar Intro 5 Minutes:  Who We Are  What We Do  How We Do It
  78. 78. 7878
  79. 79. 7979
  80. 80. 8080 7700 Irvine Center Dr., Ste. 930 Irvine, CA 92618 (888) 703 0080 www.vladvisors.com www.phantomstockonline.com www.bonusright.com

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