I was recently at a meeting at the White House Complex where I listened to a senior Federal executive bemoan Federal executive compensation. He adamantly insisted that executives in the private-sector with the same titles and the “same responsibilities” [I’m using ‘air quotes’] earn compensation that is several fold higher than the salaries of Federal executives. In his argument, he did not seem to recognize that he was comparing total compensation with salary. However, such a distinction was only ancillary to his point, which was telling Administration officials that executive pay disparity was a major problem that had to be fixed to stem the exodus of executives from his organization.
Now, as I listened to him, I couldn’t help but think of several arguably-compensable differences between a Federal executive and their non-Federal counterparts. For one thing, I couldn’t help but think that a better, though still far from accurate, compensation comparison for Federal executives would be non-profit executives.
For another thing, Federal executives seem have considerably more job security than their counterparts. The data I’ve seen suggests that, in any given year, only 0.07% of Federal executives will be fired for disciplinary or performance reasons. In fact, the Federal government is probably one of the few institutions in which spectacular failure is often rewarded with large influxes of additional resources “to fix the problem.” On second thought, that inverse relationship between success and reward could probably be expanded to include other public-sector enterprises and academia, too. But, I suspect it is far less common in the private sector.
So, all of that got me to thinking. What makes someone an executive who is thusly entitled to the prestigious (and sometimes toplofty) panoply of executive compensation?
Surely it is not the title alone that makes one an executive. If it were, I daresay that many more of us would label ourselves as executives of this-or-that. And a great number of people would then have to immediately resort to the one-upmanship of labelling themselves as “senior executives.” Before you knew it, there would be a flurry of hierarchical adjectives and compound adjectives vying for more and more compensation (such as the use of the moniker of Galactic Viceroy at Microsoft.)
So then what is it?
Is it the size of the budget that one is responsible for? And if so, if the size of the budget matters, does it matter if you’re merely responsible for spending that budget (ala a Federal executive who has to ensure that all of their monies down to the penny are spent every fiscal year) or achieving a demonstrable return on investment for that budget?
Is it the number of people in the hierarchical pyramids below a position that matter? If so, does what those people do for the broader organization matter, or merely the sheer quantity? For example, I know of one Federal organization with 550 employees and 14 senior executives, roughly a 39:1 ratio. So, if they were to hire an additional 40 employees, should they axiomatically accrete another “executive” to maintain proper executive spans of authority?
Rather than reinvent the compensation wheel, I thought I would pose the question to the wizened readers of this blog. What compensable factors make one an “executive” for the purposes of making apples-to-apples comparisons of executive compensation?
Joe Thompson, CCP, CCMP, is currently employed as a Human Capital Strategic Consultant at Booz Allen Hamilton where he assists clients with a wide range of human capital challenges. He has delivered human capital solutions across the talent management lifecycle including recruitment, job analysis, hiring, compensation and incentives, workforce planning, HR policy, attrition, performance management, change management, cyber human capital, and human capital program design, implementation, and evaluation. Joe has worked in the area of compensation for 10 years and, prior to Booz Allen, he has worked in the U.S. Intelligence Community and in the U.S. Navy.