1.
Who You Should Hire…
and How to Pay Them

2.
Vision: HelpYou Become a
Wealth Multiplier Organization
Transform the way you use
compensation to share value with
employees.

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.
44
Key Questions
 Why is this an issue?
 What do trends and
data say?
 Therefore, what?

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.
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.
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.
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.
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.
1010
Talent Assessment
 Define skill “categories” needed
to drive business model
 Identify gaps
 Form recruiting strategy

11.
1111
Millennial Career Segments
 Launchers
 Accelerators
 Catalysts

12.
1212
Launchers
 Many just left the
university
 1st or 2nd career job
 Most are single

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.
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.
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.
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.
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.
1818
The Role Principle
Three Components
 Stewardship Expectations
 Recruiting Philosophy
 Pay Philosophy

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.
2020
3. Market a Partnership
1.Compelling Future
2.PositiveWork
Environment
3.Opportunities for
Personal and
Professional Growth
4.Financial Rewards
Total Rewards

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.
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.
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.
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.
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.
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.
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.
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.
2929
The Compensation Landscape
Pay Strategies
 Expansive
 Selective
Workspan (World at Work)
The War for Stars, May 2012

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.
3131
Future Trends for Defining a
Financial Partnership
 Performance Agreements
 Opt-In Plans
 Internal Venture Capital
 Long-Term Value Sharing Plans

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.
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.
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.
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.
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.
3737
Internal Venture Capital
Outcomes
 Accelerate innovation
 Attract catalysts
 Share risk
 Identify potential future leaders
and owners

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.
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.
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.
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.
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.
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.
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.
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.
4646
Evaluate & Refine
Line of Sight
Vision
Where?
Model &
Strategy
How ?
Roles and
Expectations
My Contribution?
Rewards
What’s in it
for me?

47.
4747

48.
4848
THANK YOU!
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