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Who You Should Hire and How to Pay Them

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Who You Should Hire and How to Pay Them

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Attracting Premier Talent Comes with a Price You Can’t Afford Not to Pay!

PwC’s 18th Annual Global CEO Survey revealed that “one of the biggest headaches for CEOs is making sure that the organization has the right people to cope with what lies ahead.” It further said that “CEOs need to be sure that the business is fit to react quickly to whatever the future may throw at it – and that means filling it with adaptable, creative people, working in a culture where energy fizzes and ideas spark into life. If they can’t be found, they must be created.” View this presentation that will address how you can successfully address this priority for your organization.

Attracting Premier Talent Comes with a Price You Can’t Afford Not to Pay!

PwC’s 18th Annual Global CEO Survey revealed that “one of the biggest headaches for CEOs is making sure that the organization has the right people to cope with what lies ahead.” It further said that “CEOs need to be sure that the business is fit to react quickly to whatever the future may throw at it – and that means filling it with adaptable, creative people, working in a culture where energy fizzes and ideas spark into life. If they can’t be found, they must be created.” View this presentation that will address how you can successfully address this priority for your organization.

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Who You Should Hire and How to Pay Them

  1. 1. Who You Should Hire… and How to Pay Them
  2. 2. Vision: HelpYou Become a Wealth Multiplier Organization Transform the way you use compensation to share value with employees.
  3. 3. 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.
  4. 4. 44 Key Questions  Why is this an issue?  What do trends and data say?  Therefore, what?
  5. 5. 55 The Issue One of the biggest headaches for CEOs is making sure that the organization has the right people to cope with what lies ahead. There’s the basic question of planning for the skills that are needed now and in the future: Which roles will be automated? What new roles will be needed to manage and run emerging technology? What skills should the company be looking for, and training their people for? Where will we find the people we need? PwC’s 18th Annual Global CEO Survey
  6. 6. 66 But more importantly, CEOs need to be sure that the business is fit to react quickly to whatever the future may throw at it – and that means filling it with adaptable, creative people, working in a culture where energy fizzes and ideas spark into life. If they can’t be found, they must be created. PwC’s 18th Annual Global CEO Survey (continued)
  7. 7. 77 Key Talent Trend By 2020, the worldwide shortage of highly skilled, college-educated workers could reach 38 to 40 million, or 13% of demand. (Source: McKinsey Global Institute)
  8. 8. 88 Attracting Premier Talent 3 Keys 1. Define What Talent You Need 2. Recruit to a Role (not a Position) 3. Market a Partnership
  9. 9. 99 1. Know What Talent You Need Talent & Business Model Alignment  Have top performers working in roles that maximize their unique abilities  Avoid placement in roles that don’t have a strategic impact
  10. 10. 1010 Talent Assessment  Define skill “categories” needed to drive business model  Identify gaps  Form recruiting strategy
  11. 11. 1111 Millennial Career Segments  Launchers  Accelerators  Catalysts
  12. 12. 1212 Launchers  Many just left the university  1st or 2nd career job  Most are single
  13. 13. 1313 Accelerators  Experience with more than one company  Desire to rise in ability, recognition, contribution and influence.  Many single but a growing number are married and are starting families
  14. 14. 1414 Catalysts  Well into their 30s or early 40s  Meaningful experience  Unique abilities  Able to affect significant (positive) change  Companies are competing for their talents  Have leverage  Many married and have children E L O N M U S K
  15. 15. 1515 The Emergence of Catalysts The New Corporate Garage …Apple’s inventiveness is no anomaly; it indicates a dramatic shift in the world of innovation. The revolution spurred by venture capitalists decades ago has created the conditions in which scale enables big companies to stop shackling innovation and start unleashing it. Harvard Business Review, September 2012
  16. 16. 1616 Catalysts Change Growth Trajectory “…entrepreneurial individuals, or ‘catalysts,’ within big companies are using those companies’ resources, scale, and growing agility to develop solutions to global challenges in ways that few others…” Harvard Business Review, September 2012 (continued) Jony Ive
  17. 17. 1717 2. Recruit to a Role (Not a Position)  Position: characterized by specific duties you need someone to carry out.  Role: defined by outcomes and stewardship. Positions are filled. Roles are fulfilled.
  18. 18. 1818 The Role Principle Three Components  Stewardship Expectations  Recruiting Philosophy  Pay Philosophy
  19. 19. 1919 Key Questions  What outcomes need to be achieved if the company’s growth goals are going to be fulfilled?  What specific skill sets are needed to produce those outcomes?  What value proposition will attract and retain that kind of talent?
  20. 20. 2020 3. Market a Partnership 1.Compelling Future 2.PositiveWork Environment 3.Opportunities for Personal and Professional Growth 4.Financial Rewards Total Rewards
  21. 21. 2121 1. Compelling Future  I see myself in the company’s future.  I want a “seat at the table” in determining the direction of the company.  I like the direction the company is headed.  I embrace the company’s values.  I believe the company can achieve its growth goals.
  22. 22. 2222 2. Positive Work Environment  I like the nature of the work I’m doing.  I am working within my unique ability.  My responsibilities have strategic purpose.  I like the team of people with whom I work.  There are channels and processes for solving problems and decision making.
  23. 23. 2323 3. Personal and Professional Development As a result of my immersion in the culture and resources of this organization, my unique abilities will improve—and I will experience personal and professional fulfillment.
  24. 24. 2424 4. Financial Rewards  I have some control over how much I can earn if I produce.  I feel a sense of partnership with ownership.  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.
  25. 25. Link Company & Employee Goals Employee “Hierarchy of Needs” Cash Flow & Living Standard Risk Protection Retirement Planning Value Sharing Wealth Accumulation Qualified & Executive Retirement Plans Comprehensive, Flexible Benefits Plan Short & Long-Term Incentive Plans Salary & Bonus Wealth Multiplier Philosophy Clear Pay Philosophy 1 2 3 4 5
  26. 26. 2626 Hierarchy & 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
  27. 27. 2727 Hierarchy & 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
  28. 28. 2828 Hierarchy & 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
  29. 29. 2929 The Compensation Landscape Pay Strategies  Expansive  Selective Workspan (World at Work) The War for Stars, May 2012
  30. 30. 3030 Criteria for Value Proposition  Appeal to top talent (catalysts)  Promote and reinforce innovation  Flexible  Tied to business growth  Minimize guarantees  Large “upside” potential  Value creation and sharing focus
  31. 31. 3131 Future Trends for Defining a Financial Partnership  Performance Agreements  Opt-In Plans  Internal Venture Capital  Long-Term Value Sharing Plans
  32. 32. 3232 Performance Agreements Prominent Media Company  High performers excluded from profit sharing-type incentive plan  Annual negotiated “deal”  “Deal sheet”  Quarterly self-evaluation
  33. 33. 3333 Performance Agreement Outcomes  High performance threshold  Small or even $0 payouts can occur  High-risk, high-upside  Mentoring environment  Ownership mindset  High retention
  34. 34. 3434 Opt-In Plans Most Ideal in Start-Up Environment  Opt for:  “Higher” salary plus modest incentives  “Low” or no salary and high upside through short and long-term value sharing  Tied to a revenue or profit-sharing formula  Volatility: payments lowered &/or deferred  Opt-In periods may differ
  35. 35. 3535 Opt-In Plans Outcomes  Employees feel in control  Owners limit exposure  Highly flexible  “Shared” entrepreneurial experience  Promotes an ownership mindset  “Self-identifies” key performers
  36. 36. 3636 Internal Venture Capital Highly Entrepreneurial Approach  Larger organizations  Establish venture capital account  Define access criteria  Fund innovative ideas  Performance criteria set  Value sharing plan tied to performance criteria  Accompanied by performance agreements or “opt-in” comp plans
  37. 37. 3737 Internal Venture Capital Outcomes  Accelerate innovation  Attract catalysts  Share risk  Identify potential future leaders and owners
  38. 38. 3838 Long-Term Value Sharing Plans Broad Application  Any size organization  Can be tied to any of previous approaches  Creates “wealth multiplier” mindset  Links employees to company vision and business plan
  39. 39. 3939 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
  40. 40. 4040 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
  41. 41. 4141 Market a Future that’s Relevant  Build a sense of partnership  Demonstrate commitment  To the future business  To key contributors  Promote don’t just communicate  Be consistent
  42. 42. 4242 Communicate and Promote the Plan 1. Explain, celebrate and reinforce the total value proposition 2. Communicate a sense of partnership 3. Project the wealth multiplier opportunity
  43. 43. 4343 Employee Messaging (Customary)  Here’s the job  Let’s see if you qualify  Looks like you do…here’s the pay package  $160,000  40% target bonus  Great benefits
  44. 44. 4444 Employee Messaging (Preferred)  Here’s our philosophy about pay and rewards  Here are our specific pay programs  Here’s how our pay programs could work for you if we achieve our plan  Here’s our future  Here’s how we’re going to get there  Here’s the role we picture for you  Here’s how we encourage our people to grow and contribute
  45. 45. 4545 Key Producer Employee Value Statement  Sample EVS Year 1 2 3 4 5 5-Year Plan Achievement Level 100% 100% 100% 100% 100% Current and Inflated Salary $ 160,000 $ 166,400 $ 173,056 $ 179,978 $ 187,177 Cash Incentives Paid at Target $ 64,000 $ 66,560 $ 69,222 $ 71,991 $ 74,871 LTIP Vested Value at Year End $ - $ 74,000 $ 186,000 $ 311,000 $ 448,000 Retirement Plan Value (at 7%) $ 17,120 $ 36,123 $ 57,169 $ 80,428 $ 106,086 Total Cash Received $ 224,000 $ 232,960 $ 242,278 $ 251,970 $ 262,048 Total Wealth Accumulation $ 17,120 $ 110,123 $ 243,169 $ 391,428 $ 554,086 Total Paid or Accumulated $ 241,120 $ 567,083 $ 942,407 $ 1,342,636 $ 1,767,343
  46. 46. 4646 Evaluate & Refine Line of Sight Vision Where? Model & Strategy How ? Roles and Expectations My Contribution? Rewards What’s in it for me?
  47. 47. 4747
  48. 48. 4848 THANK YOU! (888) 703-0080 www.VLadvisors.com www.PhantomStockOnline.com www.BonusRight.com info@vladvisors.com

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