How to End Employee Complaints about Pay
Today’s Presenter: Ken Gibson Senior Vice 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 2
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 Q: Are the slides available? A: Yes, more info will be provided at the end today’s presentation: Use the question area Webinar on your control panel 3
Consultation Offer & Survey Take advantage of a one-hour consulting call with a VisionLink principal at no charge. Indicate interest on final survey. Request a copy of our slides and complimentary consultation. We value your input. 4
Post Webinar Intro 5 Minutes: Who We Are What We Do How We Do It 5
Headquartered in Irvine, CA Founded in 1996 Over 500 clients throughout North America 7700 Irvine Center Dr., Ste. 930 Irvine, CA 92618 (888) 703 0080 www.vladvisors.com www.phantomstockonline.com www.bonusright.com 6
VisionLink’s Focus: Help Business Leaders Build and Sustain a High Performance Culture Accelerate performance through pay strategies that transform employees into growth partners.
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.
Why Do Employees Complain About Pay? Because in one way or another they feel entitled. This means they have not yet learned the relationship between value creation and their earnings. 9
Entitled — Word Association Expected Presumed Deserved Anticipated Assumed Demanded Implicit 10 10
Signs of Entitlement “Why is my bonus less than it was last year?” “Why is my salary increase not larger?” “I’m doing my job. Why am I not getting promoted?” “Why can’t I have equity in the business?” “I’ve been here 15 years. Why doesn’t my compensation reflect that?” 11 11
Roots of Entitled Employee Mindset Employer lacks a coherent pay Employee lacks understanding of philosophy and strategy. value creation. 12 12
What is the Antidote for Entitlement? Stewardship A willingness to assume responsibility for certain outcomes and not expect to be paid well unless you fulfill them. 13 13
Stewardship — Word Association Ownership Accountability Engagement Leadership Responsibility Purposeful Proactive 14 14
Signs of Stewardship Employees: Assume an ownership mindset in decision making Take a strategic approach to their roles Focus on outcomes and results Protect shareholder interests Expect to create additional value before receiving additional compensation Make sacrifices to help the company succeed 15 15
How Do You Stop Complaints About Pay? Transform Entitlement into Stewardship 16 16
5 Steps to Transforming Entitlement to Stewardship Define Value Creation 1. Articulate a Clear Pay 2. Philosophy Establish a Balanced Pay 3. Strategy Adopt a Total Rewards 4. Approach Build a Sense of Partnership 5. 17 17
1. Define Value Creation Value attributable to the productivity and performance of human capital. 18 18
Build Accountability into Your Pay Design Accountable Pay 19 19
Calculating Value Creation Focus on Productivity Profit 20 20
Value Creation 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 $25,000,000 Investment ROTRI™ 30.4% 21 21 ( ROTRI™ = Productivity Profit/Total Rewards Investment)
ROTRI ™ Example: Item Figure Capital Account $20,000,000 *Variable Pay Plans (Value Sharing) are Cost of Capital 12% financed from Productivity Capital Charge $2,400,000 Profit Operating Income $10,000,000 *Productivity Profit $7,600,000 Total Rewards $25,000,000 Investment ROTRI™ 30.4% (Return on Total Rewards Investment) 22 22 ( ROTRI™ = Productivity Profit/Total Rewards Investment)
2. Articulate a Clear Pay Philosophy A written statement of what the company is willing to “pay for.” Tie it to value creation. 23 23
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. What do you want pay to communicate about what’s important? 24 24
Pay Philosophy Evolution Wealth Multiplier Wealth Creation Defensive Old School 25 25 25
Old School People Are Lucky to Have a Job Philosophy Pay the least you can to get the work done. Cost or Investment? Every dollar spent on pay is one dollar less in profits. Salaries Check the market; pay less if we can get away with it. Bonuses Maybe; let's wait and see if we have a good year. Long-term Incentives Are you crazy? (quasi-equity) If you have a business with sustainable cash flow and it doesn't Results require innovative employees or much customer interaction, this can work…but won’t attract or retain premier talent. 26 26
Defensive Don’t Rock the Boat Philosophy We want to pay people well, but we have to be very cautious. Cost or Investment? We need to be very careful to control costs--including pay. Salaries We want to be "at market." Keep searching for it. Bonuses We will try to pay bonuses as long as we can afford them. Long-term Incentives Not our cup of tea. Seems expensive and unnecessary. (quasi-equity) If you want employees who are cautious about bringing up pay Results issues . . . and accept that pay should never go lower but rarely should go higher, this is the approach for you. 27 27
Wealth Creation Let’s Focus on Performance Pay strong salaries and incentives to enable the company to Philosophy attract great talent. We are willing to pay "above market" for top performers. We see compensation as an investment that should produce a Cost or Investment? positive return for shareholders. Salaries should be "at market" for most positions but Salaries somewhat above for high value positions. Bonuses are set and communicated early in the year; they are Bonuses expressed as a meaningful percentage of salaries. Long-term Incentives May play a small role. (quasi-equity) If you want to focus on aligning employee performance and Results pay with your crucial budgeted goals, consider this approach. 28 28
Wealth Multiplier Let’s Secure Growth Partners Share economic value. "If you create financial value, you will Philosophy participate in a generous portion of it." Compensation is allocated to produce the highest possible Cost or Investment? return for both shareholders and contributing employees. We use data for benchmarking, but our pay philosophy drives Salaries where we want to be vis a vis market pay. Bonuses (value sharing plans) are tied to crucial metrics, Bonuses recognize personal contributions, and are not capped. Long-term Incentives Viewed by top performers as the most meaningful part of their (quasi-equity) rewards program. If you want to be able to attract and retain the best talent in Results your industry and have them adopt a stewardship mindset regarding shareholder goals, this is your system. 29 29
3. Establish a Balanced Pay Strategy 30 30
Value Sharing Methodology 31 31
What a Balanced Pay Strategy Means The role of each pay component in relation to others within the comprehensive compensation strategy is coordinated and clear. 32 32
Eight Components of Pay Compensation Benefits Salary Core benefits Performance incentives Executive benefits Sales incentives Qualified retirement plans Growth incentives Supplemental retirement plans Incentives should be in the form of value sharing. 33 33
Recommend
More recommend
