webinar slides: best practices in compensation and succession planning for the construction industry
TRANSCRIPT
CBIZ & MHM Executive Education Series™ Best Practices in Compensation and Succession
Planning for the Construction Industry
Presented by: Karen Fenaroli and Ed Rataj
May 18, 2015
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CPE credit
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The information in this Executive Education Series course is a brief summary and may not include all
the details relevant to your situation.
Please contact your service provider to further discuss the impact on your business.
Disclaimer
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Today’s presenters
Karen Fenaroli, CPA Senior Vice President and New York City Managing Director EFL Associates, a CBIZ, Inc. company 816.945.5402 | [email protected] Fenaroli’s recognized expertise in executive search draws from more than 25 years of experience as an accounting executive, senior-level consultant in mergers and acquisitions, and successful business entrepreneur. Her extensive involvement across multiple disciplines has made a highly valued partner for diverse organizations in defining their leadership needs and recruiting the superior leadership talent needed to drive superior organizational performance.
Ed Rataj, CCP Managing Director CBIZ Compensation Consulting 314.692.5884 | [email protected] Since starting a career in compensation consulting in 1995, Rataj has amassed extensive experience in the area of compensation, focusing on designing innovative executive, broad-based and sales compensation programs. His core business is consulting with corporate clients across various industries in the area of compensation. In addition to his core corporate work, Rataj serves as an expert witness in the area of reasonable compensation.
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Today’s agenda
1
2
Succession Planning
Compensation
3 Questions
SUCCESSION PLANNING
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Ideas…
What are best practices in succession planning?
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Common perceptions, supported by monthly unemployment reports. United States: 5.5% Construction Industry: 9.5%
Unemployment in an improving economy
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In reality, an interesting correlation exists between unemployment percentage and education
Unemployment in an improving economy
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More than eight out of ten employees intend to leave their current jobs as the economy improves:
Projected turnover as the economy improves
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A majority of employers are convinced that other organizations are actively seeking their top performers (senior leaders and high potentials) Agree: 43% Strongly agree: 13% Disagree: 11% Strongly disagree: 4% No opinion: 29%
How will you combat this?
Projected turnover as the economy improves
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Rule of Thumb: 33% to 150% percent of the annual salary Salary costs Recruiting expenses Downtime and training time
If true: Cost to replace $100K position ranges from $33K to $150K
Hidden costs of losing tenured employees
Three Big Tips for Succession Planning
Tip #1 Recruit Tip #2 Retain
Tip #3 Reward
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Non-online Build and maintain talent pipeline – your own Peer CFO Groups in your city Recruiters that you trust Networkers like bankers and vendors Your own executives and HR support
Online ideas Linkedin and others (facebook?) Alumni groups online Interactive technology even blogs
Tip #1: Recruiting - - in a modern world
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Tip #2 Retain - - Employee engagement
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“A heightened emotional or intellectual connection that an employee has for his/her job, organization, manager, or coworkers that, in turn, influences him/her to apply additional discretionary effort to his/her work.”
Employee engagement
Engaged employees = 70% less turnover
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What is your score out of six? What is your signature focus? Are you the “best talent” bringing
out the best in others? What is your unique company
culture? How do you use this to your
advantage?
What could you learn from the “best places to work”?
http://www.executive-velocity.com/want-win-best-places-work-award-heres/
Who are the top 100? http://fortune.com/best-companies/?iid=BC14_sp_lead
Employee engagement
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How do you do it? How do you get the award? What could you learn from the
“best places to work”? http://www.executive-velocity.com/want-win-best-places-work-award-heres/
Who are the top 100? http://fortune.com/best-companies/?iid=BC14_sp_lead
How do you get the talent?
Employee engagement – be the BEST
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Employee engagement – a review
• Base Pay
• Bonus
• Health Benefits
Tangibles
Intangibles
Short term Long term • Retirement
• Deferred Comp
• Job Security
• Work/Life Benefits
• Hiring Practices
• New-Hire Coaching
• Work Climate/Vision
• Supervisor Behavior
• Trust in Leaders
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Hot and new topics Stretch assignments Job rotations Title enhancement Flexible scheduling Virtual workplace & creative mobility Team building, bonding, and mentoring International assignments and role expansion (HR, IT, Tax) Engagement & mentoring with other executives and/or board Educational subsidies (MBA, certifications) $$$ Golden handcuffs (multi-year bonus) $$$ Bonuses redlined $$$ Tip #3: Rewards and Compensation – in depth
Employee engagement tactics
COMPENSATION
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Implement compensation philosophy Ensure efficient allocation of resources Provide rational basis for pay decisions
Purpose of a compensation system
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Plan and collect data Ensure job documentation accuracy Complete market analysis Design pay structures Model implementation costs Assess internal equity Create procedure manual Report results
Designing a market-based compensation system
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Job documentation
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What is market pricing? Valuation of pay for jobs in the external labor markets Key considerations when determining labor markets: Location
Local Region Nation
Size Revenue per operating budget Number of employees
Industry Industry specific Broad spectrum of employers
Market pricing methodology
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Reliable Data Published survey data
Major consulting and surveying firms Statistically validated Standard deviation analysis of data
Unreliable data examples: Self-reported data DOL Data from one or two competitors
Market pricing methodology
PAY DIFFERENTIATION
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Designing salary structures
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Merit Matrix Approach: Affects pay increases, not pay structure Rewards performance Focuses dollars on employees that are most likely to leave
because of pay
Pay for performance
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Merit matrix
Employee 1 ( ) and Employee 2 ( ) are both accountants with exactly the same tenure, experience, education and pay. Only performance differentiates them. To whom would you provide a higher pay increase, low-performing Employee 1 or high-performing Employee 2?
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In this example, all other factors are equal except current base salary. To whom would you provide a higher pay increase, high-paid Employee 1 or low-paid Employee 2?
Merit matrix
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Finally, all other factors being equal, to whom would you provide a higher pay increase, high-paid/low-performing Employee 1 or low-paid/high-performing Employee 2?
Merit matrix
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Merit matrix
Typical
Matrix
Performance 1 2 3 4Exceptional 3.5% 3.5% 3.0% 3.0%
Exceeds Expectation 3.0% 3.0% 3.0% 3.0%Effective 2.5% 2.5% 2.5% 2.0%
Development Needed 2.5% 2.5% 2.0% 2.0%Critical Need for Improvement 2.5% 2.0% 2.0% 2.0%
Quartile in Range
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Merit matrix
Best Practice
Matrix
Performance 1 2 3 4Exceptional 6.5% 5.5% 5.0% 4.0%
Exceeds Expectation 6.0% 5.0% 4.0% 3.0%Effective 5.0% 4.0% 3.0% 2.0%
Development Needed 2.0% 1.0% 0.0% 0.0%Critical Need for Improvement 0.0% 0.0% 0.0% 0.0%
Quartile in Range
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Merit matrix
Ultra-Aggressive
Matrix
Performance 1 2 3 4Exceptional 13.0% 11.0% 5.0% 3.0%
Exceeds Expectation 11.0% 6.0% 3.0% 1.0%Effective 4.0% 0.0% 0.0% 0.0%
Development Needed 0.0% 0.0% 0.0% 0.0%Critical Need for Improvement 0.0% 0.0% 0.0% 0.0%
Quartile in Range
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Results
Model fits within budget
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Cost neutral Rewards performance “Targeted” turnover Fair and efficient method for administering pay Accelerates employees to market competitive pay levels
Merit matrix
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Common Pitfalls Structures out of alignment with market
Garbage in, garbage out May improperly allocate limited salary increase dollars based upon the
current competitiveness of pay
Performance scores not calibrated Supervisors can learn to game the system Cheating is rewarded Top performers may not be properly rewarded
Matrix results outside of budget
Merit matrix
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Executive recruitment Career transition services Job description writing Sales compensation Reasonable compensation
Additional things to consider
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Questions?
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Join us for these upcoming courses: 6/10 & 7/8: How DOL Enforcement and Recent Litigation is Impacting
Your Employee Benefit Plan 6/30 & 7/7: Second Quarter Accounting and Financial Reporting
Update 7/21: The Pitfalls of Linking Pay With Performance and How to
Overcome Them 7/30, 8/4 & 8/5: Eye on Washington - Quarterly Business Tax Update,
Q2 2015
View this related video: Tips for Finding Talent in the Construction and Engineering Sectors
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