Resources: Blog Post
Executive pay: A coincidence of wants
I recently had the pleasure of addressing an exclusive group of transitioning executives on pay – a primer on current trends and what to expect as they encountered offers from prospective employers.
The attendees were experienced C-Suite types and, as the discussion unfolded, it became apparent that there was frustration with prospective employer expectations with regard to earnings that I suspect might be common amongst many seasoned executives in transition.
A number had been with their employers for a considerable period, probably longer than judged by current standards. I was asked if there had been a recent re-pricing of executive pay.
When we serve an employer, particularly at the top of the house and for an extended period, the more valuable we become to that employer. We get to know how to avoid the road blocks, the personality, and competency challenges Ė and we know the company processes like the backs of our hands. This experience enables the removal of many barriers to productivity and avoids additional cost for the employer.
To that employer, that expertise has value and commands additional compensation. Over time, this eventually exceeds competitive norms. Reward near the top of the range is justified by the appreciated, additional contribution.
When the business hits a downturn, anticipates a major expansion, acquires a new owner or any one of a number of other events, that knowledge can be perceived less valuable and the associated cost, no longer justified. In fact, it may be perceived as a barrier to progress Ė thatís business and we have to move on.
The perception of value by an employer who has witnessed a positive contribution over an extended period is going to be higher than a new employer and next to impossible to replicate immediately.
Employers should not be accused of meanness in the face of their unwillingness to meet these expectations. There is not a coincidence of wants. Whether an executive can initially deliver at this level or not is irrelevant; employers donít believe they can. One party fails to see the same value as the other.
Employers however, are not well served in dismissing an opportunity without exploring mutually agreeable territory which we believe lays in placing more pay at risk. Fixed pay or base salary should reflect what the business can afford, and internal equity. But, self financing variable pay or equity could represent a bridge to meeting expectations.
An employer who feels they are paying too much will apply excessive pressure to perform; an underpaid executive will feel frustrated and under deliver. Transitioning executives need to be prepared and understand their commercial value to the new employer. Employers want to capture exceptional experience that can take their business to the next level. It is incumbent, when the fit feels right, to find a workable formula that both parties can accept. It needs to be one that enables the performance to commence!
About the Author
Paul Pittman is the Founder and President of The Human Well, a collaborative human resource consulting boutique addressing the needs of mid-sized businesses. Paul has more than 25 years of experience in International Human Resources, working with boards and executive management on compensation. He has led multi-culture change initiatives, global asset management strategies for pension and savings plans, established captive insurance companies for managing employee benefits and global employment entities for effecting mobile talent programs.
He is a former member of the Conference Board of Canada’s Council of Human Resources Executives and speaks regularly at conferences in North America and Europe. He was formerly editor of a major reference work on international human resources.
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