WANTED: A CEO who can wear 12 hats increase sales 18 percent and double the company’s $50 million revenue. Must have deep experience in the field and a reputation as an aggressive growth leader. Competitive salary.
Companies that adopted conservative hiring practices several years ago are now on the hunt for top executives to propel their businesses. Recruitment for C-level players takes longer, requires tireless interviews and involves much more due diligence since corporate scandals turned on companies’ personnel radars.
But at the negotiation table, top execs are promised more total compensation; more short- and long-term bonuses, fringe benefits like technology, and robust health plans. Base salary is just a starting point. Executives know if they take risks and turn a company around, they will be compensated for their efforts.
The marketplace is changing. Companies dedicate more time and energy to locating the right people, and they must pay to attract and keep them. For example, in years past, the interview processes were shorter. After hiring a CFO, the executive team would wait a few months before they trusted the executive enough to bring him or her into their management team’s inner circle. Today, companies can’t afford that ramp-up time. They need a leader who can hit the ground running. As a result, you see longer interview processes. Because companies feel that they know the executives better after a longer interview process, they are more willing to provide an attractive salary with bonuses rather than waiting out an initiation period.
Companies are better positioned to make changes in their top-executive lineup and today’s unusual environment provides significant advantages. Those companies who have been conservative in their hiring practices in the past several years are ready to make changes and locate executives who can ignite growth in their organizations.
The baby boomer talent gap that has previously existed is temporarily closing as executives are postponing retirement
to further ensure their own financial security. This is the time to take advantage of this highly experienced talent pool and their years of expertise. They are more widely available in the market, and a powerful resource to provide competitive advantage. So when a company has an opportunity to recruit a top executive that it perceives will take the business to the next level, competitive compensation, bonuses and benefits are critical to seal the deal.
There has been a change in attitude regarding the structure of compensation attracting top-level executives. Executives are not simply expecting a static base salary of $170,000. They understand they are entering an environment that demands growth but they will inherently earn a good salary. If they are willing to take some risk to grow the company, they know they will be compensated for their efforts. It is a risk-reward strategy. If a company wants to grow from $50 million to $100 million, there is risk involved for the executives. How will they be rewarded for performance?
Today, executives desire both short- and long-term bonuses, which along with base salary, comprise cash compensation.
If a company is hiring a vice president of operations, a top candidate may accept a lower base salary, agreeing to $150,000 rather than insisting the company match his or her former $170,000 salary. But the company must be more creative in structuring signing bonuses as well as short- and long-term bonuses based on performance. In addition, they should also contemplate creating a VP executive bonus pool. If the company exceeds performance goals, a chunk of revenue is set aside for the VPs to split evenly. This is one example of creative long-term bonuses.
To further illustrate the long-term incentives, we recently placed a vice president of sales with a company. In this situation, the VP actually accepted a base salary that was $50,000 less than his previous role. This vice president of sales was willing to take risk in his base salary to show the company firsthand how much value and revenue he could generate for the new company. In his compensation package, however, we negotiated that the VP would earn a larger percentage on the revenue he generated. In essence, this situation becomes a win-win. The VP took a smaller base salary for larger sales incentives. If the VP is successful in growing sales, both the company and the executive win.
Companies are providing top executives with more fringe benefits as well. Base salaries are not necessarily increasing significantly. However, we are seeing more advances in total compensation. Total compensation equates to providing anything of value to executives to retain them and keep them happy. This might include club memberships, meal per diem, top-tier health care coverage and company car allowances. In addition, as technology advances, companies are giving more than cell phones and PDAs to their executives. Providing top employees the tools necessary for off-site access to company networks benefits both the company and the executive. Cyber offices, e-commuting and home access are all gaining popularity as companies come to support the need for this flexibility as well as the value it brings to its executives.
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