Compensation Cafe

Does Discretionary = Discriminatory?

ESG (Environmental, Social, and Governance) goals have become the rallying cry of investors and board advisors. DEI (Diversity, Equity, and Inclusion) goals remain a key issue for Human Resources professionals. At many companies, there is still a widespread allowance for discretion in setting pay levels, variable compensation incentives, and equity compensation awards. Discretion is a precarious thing. It allows companies to recognize great talent or performers, while at the same time allowing for potentially discriminatory practices. Getting your arms around this topic may save you from a load of hurt in the future.

Most leaders and talent acquisition professionals want the autonomy to negotiate with prospective employees. This gives them the ability to create the best value proposition for both the company and the individual. The majority of HR and compensation professionals seem fine with discretion and many do not have a formal review process to ensure the final offer rationally fits within the pay structures of the rest of the company. Unfortunately, I have seen base pay numbers that range from $60K to $200K for the same role! So much about total rewards depends on the foundation of Base Pay. When the foundation is so differentiated, it is nearly impossible to have other pay elements make sense.

It is still a common practice for companies to offer discretionary “bonus” programs. These programs often fail at their intended purpose. The lack of transparency means that differences in amounts can seem like they are based on favoritism (and they often are.) The programs also suffer from “recentism”. Work done in the most recent quarter is unconsciously weighted more heavily than worked performed earlier in the year. Like a kid who does all of their homework the last week of the school year, this allows people to work hard and campaign during “bonus season” and be rewarded like they did great all year. Combining something that may not seems fair with an ability to manipulate results seldom creates a satisfying result.

When you add equity compensation as a pay element the results skew even worse. People like round numbers, so grants under up being in round numbers. How much more can 2,500 shares deliver than the standard 2,000? Using Amazon as an example: In 2016 Amazon stock was around $1000/share. Today it is about $3,200/share. 500 additional shares would have created an additional $1.1M over the last five years! An extreme example, of course, but not that extreme when compared to the relative changes in values between an early-stage pre-IPO company and the same company after its IPO.

Here are some things you can do to get started.

1. Limit the level of negotiation and discretion for Base Pay. This is true for pay above and below your target amounts. Just because you can hire some for far less than the market, doesn’t mean you should. Unless paying below market is a common practice for your company, it is likely to result in an unfortunate dispute in the future.
2. Put more structure into your annual bonus programs. Educate your managers on how they can and should use their budget. Perform peer reviews or approvals to ensure that bonuses aren’t based on relationships or recent activities. Consider creating a real Short-Term Incentive plan with measurable goals and related payout levels.
3. Be far stricter about equity award sizes. Provide strong, understandable guidelines. Make sure everyone involved understands the potential impact of a differentiated grant. Scale standard award sizes to flatten differences in base pay for the same job level.

Without an underlying current of ESG and DEI concerns unchecked discretion has been a real problem for as long as people have been paid. With the overarching goals, audits, and visibility that come with better governance and concerns about discrimination and fairness, unchecked discretion is a time bomb waiting to ruin an upcoming year for you and your company. Getting ahead of it before the new year should be a goal for everyone in Human Resources and Compensation.

Dan Walter is a CECP, CEP, and Fellow of Global Equity (FGE). He works as Managing Consultant for FutureSense. Dan is also a leading expert on incentive plans and equity compensation issues. He has written several industry resources including a resource dedicated to Performance-Based Equity Compensation. He has co-authored ”Everything You Do In Compensation is Communication”, “The Decision Makers Guide to Equity Compensation”, “Equity Alternatives” and other books. Connect with Dan on LinkedIn. Or follow him on Twitter at @DanFutureSense.

A Question of Pay Acceptance

Managing the day-to-day activities of compensation can be complex in itself.  The role of total rewards is multi-faceted and impacts several key organizational areas such as talent management and balancing operational costs).  It is strategically linked to organizational goals and to culturally managing the perceptions of pay. 

From an outsider (or employee) perspective, the rudimentary thought is that we are simply not paid enough and that HR is not capable of nor doing enough to address this need.  Whilst this very well may be the case, what is becoming more obvious is the evolving role of the Rewards practitioner.

The context in which we operate today encompasses not only the balancing of data with art and science but also addressing the more sensitive and emotional side of pay.  Compensation resides beyond the four walls of an organization but is being impacted by the societal landscapes in which we operate.  For example, the MeToo Movement reignited the need for employers to address gender pay inequities and job value.  The “woke” culture has put in motion the organizational integration of diversity, equity and inclusion, the dismantling of racial injustices, and the curating of equal opportunity.

For the same reason in which we approach total rewards with a newfound level of acute awareness,  our workforce, as the recipients of our pay programs, must also display a similar level of “wokeness” when it comes to pay acceptance. 

If the ask is for the employer to be more transparent, then as an employee one must be as willing to handle the truths around the design of the compensation philosophy and outcome of how pay is structured and ultimately delivered.  Assuming it's a well-intended design, then it's a matter of accepting the organization's culture.  Through sound pay education acceptance resides with the individual and their ability to acknowledge the balancing act an organization has.  This encompasses the responsibility to afford, sustain and compete at a level that attracts the right talent to deliver the business objectives. 

Eradicating injustices around us may take a valiant effort, one best achieved through acknowledgment, acceptance, and collaboration.  The same applies to an organization's total rewards strategy.  If the practitioner seeks a higher level of awareness, then the question remains, how able and willing is the employee to find common ground?

Reena Paul (CCP, GRP) works as a Senior Compensation Consultant.  She is passionate about all things “total rewards” and has experience in dealing with all stakeholders of an organization and strategizing optimum client-focused solutions.  A lover of data and the story it tells, Reena enjoys the exploration of presenting and discussing compensation with a fresh perspective.  Connect with Reena directly on  LinkedIn. 

Image source: Unsplash image with credit to Simone Secci.

3 Reasons Great Equity Compensation Creates Great Responsibility

The job market continues its hot streak. Companies continue to grow. Investors are driving values high and higher. Individuals are asking for, and often expecting a piece of the success their contributions have helped create. More and more companies outside of the traditional sectors of technology, life sciences, finance are turning to equity compensation to reward their employees. Equity compensation can give companies superpowers. But with great power comes great responsibility.

1. Vesting creates a new urgency to manage participants

Companies work hard to hire the best people they can. They also work hard to manage out the worst people they hire. Great companies reward their best people. Some companies let a small percentage of not great, but also not valuable, employees get pulled along in the wake of their success. Granting equity compensation magnifies the obvious problems with this habit.

A vesting schedule defines milestones for a person to show that their value matches the company’s expectation. It is imperative that managers are taught and reminded to ensure performance is aligned with the awards an individual holds. Equity is a finite resource, and it cannot be wasted on people who are not helping you succeed.

2. Diversity, Equity, and Inclusion

Ironically, equity is typically the least equitable form of compensation. People with more forward personalities or negotiation skills often get larger grants than their peers. This leads to long-term values that magnify seemingly small variations in award size at the time of hire.
The arbitrage performed at the time of hire benefits the overly confident and leaves less for your best long-term performers. Companies should consider removing or severely limiting new hire equity negotiations to improve future DEI issues.

3. Small errors lead to large problems

When a compensation professional makes a mistake in the market pricing for a base salary it may cost the company or individuals thousands of dollars. When a similar mistake is made for an equity grant it can cost the company or individual hundreds of thousands, or even millions of dollars. The paradox of equity is that you must be supremely confident in your grant practices while you are supported by sketchy or vague data.

When looking at equity compensation market data you have little idea of the underlying details. You don’t know the intention of the awards. You have little or no details on vesting schedules, termination provisions, or performance conditions. You likely don’t know the prior growth history of the company or the expectations for future growth or an exit event. You don’t know what the investor waterfall looks like at each participating company. In short, the data provides a guideline, but it does not provide answers.

When granting equity compensation, take the time to understand the purpose of the awards and how your grant details, practices, and data contribute to or hinder your long-term success. Take the time to educate managers of the additional responsibility they have in managing their staff to their awards. Ensure your processes do not undermine the hard work you are putting into correcting DEI issues. Remember that equity compensation is missing more than it includes. Things reported as trends are probably only things a few very visible companies are doing. Best practices are just the most common way of using equity, not the best use for your company. As a burgeoning young superhero, take the time to learn your abilities and limitations. With equity compensation’s great power comes great responsibility.

Dan Walter is a CECP, CEP, and Fellow of Global Equity (FGE). He works as Managing Consultant for FutureSense. Dan is also a leading expert on incentive plans and equity compensation issues. He has written several industry resources including a resource dedicated to Performance-Based Equity Compensation. He has co-authored ”Everything You Do In Compensation is Communication”, “The Decision Makers Guide to Equity Compensation”, “Equity Alternatives” and other books. Connect with Dan on LinkedIn. Or follow him on Twitter at @DanFutureSense.

Total Reward Lessons from the Olympics

For a few momentous weeks, the world’s best athletes and benevolent fans will witness some of the greatest achievements and feats in sports.  The 2020 Summer Olympics are in full swing and as an inherent need, I find myself trying to see whether there is a link to total rewards.  Unsurprisingly, there is! 

Some of these lessons are positive takeaways, others emphasize the stark realities of incentive design, while another will only magnify a persisting inequity in how we value the essential asset at the heart of all this, the employee or athlete.

Starting with the good.  The Olympic Games exemplify the employee life cycle.  An elite star is not born overnight; likewise, an expert professional grows and develops with time.  In addition to selling a customized total rewards package catered to an employee's preference, organizations must also diagnose how each of their employees learns best and sell your development opportunity.

No one athlete is the same, their diet, training, and conditioning regiment will be specifically designed to ensure their optimum success. The role of the coach is to seek out the right tools, have a plan and the platforms to facilitate their growth.  As business leaders and people managers, we are the workplace “coaches.”  Our duty is to advocate and solicit feedback, enabling us to design the training and development (“L&D”) programs that will ultimately meet the unique learning styles of our employees.  By integrating a continuous performance management program with L&D, we build a consistent feedback loop.  Steadiness in this process creates real-time performance adjustments so the next evaluation of the output inches closer to the individual’s goal.

The second learning reveals the reality of most things competitive; there will be only one winner.  Many will try, but the percentage of which reaches the top is minimal.  This statistic is a key consideration when designing an affordable and sustainable incentive program.  The internal spread of performance will take the form of a bell-shaped type of distribution, the majority of employees meeting and falling just below the “podium” level.  Leaders rating everyone exceptionally will not be feasible towards managing costs, nor is it conducive towards differentiating the good vs. the gold medal performer.

Finally, there is a real price to pay when striving for Olympic glory.  Despite all the sacrifices, the payout doesn't seem to align with the time and effort exerted.  Like the workplace, we have a ways to go in eradicating gender pay inequities and creating equal opportunities for all.  Similarly, the Olympics illuminates several instances where the practice is questionable in terms of treating and valuing athletes fairly.  For example, do they all have similar access to funding and training needs? Are female athletes that are performing to the same level as the men's team paid equivalently? What about the unfair balance of favoring one sport versus another, due to its influence on profits?

While the Olympics opens the world to diversity, it may be falling short in its efforts to equitably include, value, and reward, qualities that all employers should bear in mind and better execute upon in their workplace.

Reena Paul (CCP, GRP) is a Senior Compensation Consultant.  She is passionate about all things “total rewards” and has experience in dealing with all stakeholders of an organization and strategizing optimum client-focused solutions.  A lover of data and the story it tells, Reena enjoys the exploration of presenting and discussing compensation with a fresh perspective.  Connect and contact Reena directly on LinkedIn

Photo by Bryan Turner by Unsplash

The Rewards Partner

We are accustomed to wearing many hats in the profession of total rewards, whether it be the role of the accountant or that of a communications expert.  Today’s call to action is to play, also, the role of a marketing strategist.  As organizations look towards turning a new leaf in economic recovery efforts, employers are faced with increased pressures to attract, retain, and motivate the workforce.

It will be a tall order to ask of us, but we in the profession know that economic, social, and pandemic-related impacts are forming to be the catalysts in how we reform, re-define and re-brand the total rewards value proposition.

Functioning now as “Rewards Partners”, we must construct a workplace story that evokes emotions of career reward and fulfillment and, more importantly, delivers the realities of it to existing and prospective employees.  There are several strategies which employers can act upon to retain and compete for talent.  The following are just a few examples to facilitate your efforts towards this renewed mindset when it comes to repositioning your organization's total rewards program.

For starters, data analytics and intelligence are key in allowing us to go beyond the surface level.  Descriptive employee data that covers all factors of employee demographics such as experience, education, tenure, job type, etc. is at the heart of helping us understand our workforce makeup.  It enables us to distill the perceived versus persistent gaps that exist in our organizations. If you have not already done so, then you must document, track and extrapolate your human capitals data to outline today’s story.  Only then can the story be filled in by the informed decisions you make herein.

Equipped with data in hand, you have a stronger sense of the multi-generational workforce that exists both internally and externally.  The needs of each generation will vary and this is where the Rewards Partner must excel.  For each cohort, there is a different message and rewards element to sell.  Repackaging the total rewards offering to meet their needs is your blueprint in creating a sense of flexible benefits.  The millennial who has a growing family would much rather hear about the work-life balance and childcare services on offer versus pension plan guidelines for an impending retirement.

Finally, to compete for skilled workers, we must check whether we are prohibiting ourselves from supporting a diverse talent pool.  Diversity, equity, and Inclusion are emerging priorities in the workforce.  A key proponent to this initiative is breaking down the biases.  Providing training to conquer our individual biases is one thing, but we must address the systemic biases that our organization has.  To do so, conducting an audit on our existing HR practices, policies, and approaches towards hiring, developing, and promoting employees is an integral step.  Getting to the root of how we conduct ourselves in these scenarios will shed light as to whether we are operating in a way resulting in certain groups being advantaged and others disadvantaged or devalued.  

As Reward Partners we have the opportunity to support our organizations in carving the pathway towards being an employer of choice, it will be a journey in itself that will be as unique as the story of total rewards we tell.

Reena Paul (CCP, GRP) is a Senior Compensation Consultant.  She is passionate about all things “total rewards” and has experience in dealing with all stakeholders of an organization and strategizing optimum client-focused solutions.  A lover of data and the story it tells, Reena enjoys the exploration of presenting and discussing compensation with a fresh perspective.  Connect and contact Reena directly on LinkedIn

Photo by Bernd Dittrich on Unsplash

7 Current Post-Pandemic Compensation Developments

The past couple of weeks have shown us that compensation in a post-pandemic world may be less predictable than predicted. Mask mandates have loosened. Businesses that have been closed are starting to get back to work. Businesses that have been fully remote and beginning to explore hybrid and return-to-work models. Companies are addressing talent acquisition challenges with better pay. Equity compensation vesting schedules may finally be changing. ESG (Environmental, Social, and Governance) goals are getting more than lip service. DEI (Diversity, Equity, and Inclusion) metrics are becoming what we thought they would be before COVID-19 began. And executives somehow continue to be paid well despite some less than stellar results. Here’s a quick round-up of what we’re seeing and what we aren’t.

1. Businesses are getting back to work. Restaurants, theaters, live music venues, and other businesses shut down by social distancing needs are finally starting to reopen in earnest. This will invariably create pay pressure in hourly service positions and might be the first step in a new battle for hourly talent.
2. Employees are going back in to work. Many companies are bringing people back to the office. Some are using a soft touch to entice people back, others… not so much. PacifiCorp tells Portland employees to return to the office in less than 2 weeks or take pay cut
3. Pay rates may be starting to reflect the new market. I have had several clients tell me that it is harder than ever to hire key talent. They also argue that survey data is not reflecting the actual talent market. In addition, some banks have raised their minimum wage to $25/hour. We may finally be seeing the compensatory impact of changing how people work.
4. Equity Compensation vesting schedules are changing to correct a well-known problem. I have discussed before that equity compensation vesting schedules have basically not changed in more than 25 years. Basically, 3 or 4 years for RSUs and stock options. We are not seeing companies use 6 and 7-year schedules to align with long-term goals. We are also seeing equity plans with 1 and 2-year schedules to reflect the “bonus” intent for those companies. Stripe and Lyft Speed Up Equity Payouts to First Year
5. ESG goals and being a better company is kind of a “thing.” Environmental, Social, and Governance goals are the current buzzwords for executive compensation. According to Barclays, sustainability is leading the pack. The goals are growing in popularity around the world, nearly everywhere at the same time. It will take several years for companies to figure out the “formula” to cynically do just enough to get credit and not so much that it actually impacts change. Until then, we are likely to see some positive and interesting changes!
6. Treating all employees with the respect they deserve is seeing continued growth. DEI (Diversity, Equity, and Inclusion) has been on the radar for several years, but we’re seeing more companies actually do something about it. Executive pay is being linked to DEI, and more companies are finally getting their data and processes to see real movement. But check out this article about Starbucks questioning its motives, and this article on their disclosed program. 
7. Executives are still somehow being paid a lot even when performance may not fully justify it. I won’t rehash the following articles, but they are worth a quick read. CEOs are getting big bonuses, even when their entire industries have been basically shut down during the past year (CEO Pandemic Pay: ‘Heads I Win, Tails I Win Almost as Much’). CEOs are getting big bonuses even after cutting front-line employee pay, or even shutting down stores to avoid paying people. Kroger CEO Cut Workers’ COVID-19 Hazard Pay, Grabbed Record $22.4 Million Package Himself.

I know it is a lot to absorb. We are seeing changes. Some in the compensation profession are actually driving changes. We will have a lot to discuss as this year progresses and figure out what the New New Normal looks like. Until then, have a great week!

Dan Walter is a CECP, CEP, and Fellow of Global Equity (FGE). He works as Managing Consultant for FutureSense. Dan is also a leading expert on incentive plans and equity compensation issues. He has written several industry resources including a resource dedicated to Performance-Based Equity Compensation. He has co-authored ”Everything You Do In Compensation is Communication”, “The Decision Makers Guide to Equity Compensation”, “Equity Alternatives” and other books. Connect with Dan on LinkedIn. Or follow him on Twitter at @DanFutureSense.

Disparity in Opportunity

Sometimes it goes up, and other times it falls down but it never seemingly finds a way to flat-line to a neutral base.  I speak of the ebbs and flows regarding the gender pay gap.  The battle to overcome the parity we observe among gender wage has been a longstanding issue.  An issue where we continue to fall short in paying each other equally for our time and effort on the job (for every dollar earned by a male colleague, female workers earn nearly 20 cents below this).

I acknowledge that organizations and industries are taking pragmatic and conscious efforts to address these concerns internally, due in part to having to meet pay equity-related legislation; however, there is another piece of this equation that requires equal attention. 

When conducting your pay equity analysis, and viewing the distribution of gap(s), you might find that the weighting of employees dispersed towards management, senior management, and executive-level positions reflects male dominance.  This equation, therefore, requires attention to equal opportunity.  An equal opportunity that presents, encourages, and integrates proactive measures to facilitate career progression and development for female workers.

I do not mean to imply that having an increased “number of female observations” in our analysis will mitigate the wage gap, for all we know it could potentially worsen.  And, if that were to be the case, then there is even more cause for concern.  In such cases, we should be questioning why the gap has increased.  What are we doing or not doing to encourage equal representation (especially at the senior level)?  What will we do to improve it, and foremost… do we care to?

I put forward the question of whether employers care because I think it is a foundational first step for any organization to truly make strides in battling disparity.  If you value attracting, retaining, and motivating the right talent, then it pays to take the deliberate and purposeful steps to assess your gaps and put in motion the steps to alleviate them.

From the perspective of equal opportunity for the female workforce, consider the following actions and undertakings:

1. Data analysis – what is the story of equal opportunity for your organization?

2. Inventory check – do you currently provide career and learning opportunities? What are the eligibility criteria for additional training? Do you offer job-sharing or have a mentorship program?

3. Work-life balance – ensure your total rewards package includes programs to support working moms.

4. Remove the bias – often we approach promotions or job hiring with pre-conceived notions. We must eliminate what we think we know and stay objective and fair.

5. Hear it from the source – whether it is a direct forum to solicit feedback or connecting with line managers, you must try to obtain the unfiltered thoughts of your female workforce and use this information to guide your decision making.

Equal opportunity is not exclusive to just the female workforce, this is one perspective from the greater conversation that encompasses Diversity, Equity, and Inclusion ("DEI").  Take a step back and see where you stand as an organization, and whether you care to make a difference.

Reena Paul (CCP, GRP) is a Senior Consultant with LifeWorks Compensation Consulting Team.  She is passionate for all things “total rewards” and has experience in dealing with all stakeholders of an organization and strategizing optimum client focused solutions.  A lover of data and the story it tells, Reena enjoys the exploration of presenting and discussing compensation with a fresh perspective.  Connect with Reena on LinkedIn, or contact her directly at [email protected].  

Creative Commons Image courtesy of Brooke Lark on Unsplash

SPAC Attack: Bridging the De-SPAC Gap

SPACs have many critical inflection points, but the De-SPAC process is truly special First a SPAC is formed and goes public. Then the SPAC finds you, a beautiful company in the rough, just bursting to experience growth and success. Then you both agree to join and beat the world. You announce your intentions in a big splash and the De-SPAC process begins.

It’s kind of like when two young people get engaged early in a relationship and hoped that their parents and their lives would bolster them through a successful wedding day. Most of the time it works, but some engagements end because the additional scrutiny proves the pairing will not work. Others end in someone getting left at the altar. Successfully navigating this period requires resolve, enthusiasm, openness, and some luck.

The De-SPAC process usually runs from 3-5 months. During this time both parties work to convince current and potential shareholders that the union will work. Regulatory bodies like the SEC also get involved and provide their opinions on the impending marriage. The companies involved may also look to bring in additional funding via a PIPE transaction. There is a ton of work and if things go wrong, the deal falls apart.

Much of this is out of the hands of compensation professionals, but there are areas where comp pros must be on point.

First, you must communicate with your employees. The De-SPAC process starts when the world knows about the deal, this means your employees will know. They will be curious, anxious, excited, confused, and looking to the company to fill in the blanks. This is a GREAT time to use communication professionals. Get some help!

Next, everyone will be watching to see if the company is performing well. This means no major snafus in the execution of incentive plans and no major employee relation issues. If there are important compensation issues on your “to-do” list, you need to get the support you need to quickly address them. In today’s environment, this may mean addressing Diversity, Equity, and Inclusion issues. It may include clean-up work on equity awards, better clarity and automation of your annual or sales incentive plans, and reworking of your 401K and other benefits plans. Get some help.

If the De-SPAC process is successful, current and potential shareholders will support the deal. Regulatory bodies and auditors will find the facts acceptable, and employees will remain supportive and enthusiastic. You will become a publicly traded company and your stock price will rise.

If the De-SPAC process fails shareholders will redeem their investments, basically demanding a refund before the deal is done. Your company will not become publicly traded and there is a real risk that your company will not survive at all. Being left at the altar of a SPAC deal can make it hard to find new investors as a private company.

For those people who have gone through an IPO, the De-SPAC process can feel familiar. The excitement of potential is balanced with the palatable risk of failure. The big difference is that failed IPOs usually have much softer landings.

Dan Walter is a CECP, CEP, and Fellow of Global Equity (FGE). He works as Managing Consultant for FutureSense. Dan is also a leading expert on incentive plans and equity compensation issues. He has written several industry resources including a resource dedicated to Performance-Based Equity Compensation. He has co-authored ”Everything You Do In Compensation is Communication”, “The Decision Makers Guide to Equity Compensation”, “Equity Alternatives” and other books. Connect with Dan on LinkedIn. Or follow him on Twitter at @DanFutureSense.

Change is Power

ERI recently published the results from a survey on the impact of COVID-19 on compensation. It was the first report I have seen that showed some actual pay movement as a result of the ongoing pandemic. More telling were the more than 65% of companies who were either progressing with the plans they made at the beginning of 2020 or had not yet made any decision on what to do.

We have entered the second week of November 2020. If you throw out the two-weeks of holidays for Thanksgiving and Christmas/New Year, we have about 5 weeks to prepare for 2021. Not having a plan, is a great way to lose in the battle for talent and success. You seldom watch movies or read stories about the times people did absolutely nothing and somehow met their goals. This is because it almost never happens.

Change is your competitive advantage when others are paralyzed by indecision. Action is your secret sauce for success when those around you are simply too lazy to do something different. Whether we like it or not, the world is a much different place than it was just a year ago. We will never fully return to those heady, coronavirus-free, yesterdays.

Remote work is here to stay. What that means for your company is probably unique, but change is a must. Pay will change. Work-life balance will adjust. Ignoring this will not make it go away.

Unemployment will remain higher than it has been for several years. This tends to put downward pressure on pay.  It may also mean a greater talent pool for some industries. Staying ahead of the market may be easier and allow you to hire materially better talent without spending a fortune.

Now is the time to fix your worst incentive plans, or adjust pay structures that have crumbled under the weight of furloughs, lay-offs, remote work, shrinkage, growth, or any other of the myriad of issues that are being faced in business. Yes, you are tired. But so are your competitors. The best time to win is when they can’t respond. In a world where increases have been in low single digits for a decade, it doesn’t take too much to set your company above the crowd.

Change will happen. The question is whether it will happen TO you, or BECAUSE of you. The former isn’t much fun and the latter puts you in control. As you move into finalizing things for 2021, consider one or two big things that will allow you and your company to set yourselves apart. When everyone else is paralyzed, it won’t take much to do something that makes difference.

Dan Walter is a CECP, CEP, and Fellow of Global Equity (FGE). He has convinced himself he is a “Compensation Futurist” and works as Managing Consultant for FutureSense. Dan is also a leading expert on incentive plans and equity compensation issues. He has written several industry resources including the only resource dedicated to Performance-Based Equity Compensation. He has co-authored ”Everything You Do In Compensation is Communication”, “The Decision Makers Guide to Equity Compensation”, “Equity Alternatives” and other books. Connect with Dan on LinkedIn. Or, follow him on Twitter at @DanFutureSense.

Transformation is More than a Haircut

Not that long ago I got my haircut for the first time in more than six months. The result was eye-opening (literally, because my hair was always in my eyes.) I went with something that looked much like what “normal” was before March 2020. Around the same time, a friend had her hair cut as well. She had one side of her head shaved and went bleached blond for the rest. The difference was amazing, some would say transformational. But then I realized I had a third friend who had spent the past couple of years working out and eating right. She, after having two kids, was in better shape than she had been when she was in great shape in her twenties.

While the changes for each person were immediately noticeable, only one result was a true transformation. Transformations require time, commitment, and tenacity. This past year has proven to be transformational for many people and many businesses, but I have yet to hear much about transformations happening in total rewards. If there was ever a time to transform, this is it.

Base pay has proven to be a challenge in many ways. Remote work has given rise to questions about Geographic Differentials. Pay levels have been stressed by furloughs, layoffs, essential worker status, and volatility in staff availability. Bonus programs have proven to be fragile. In some cases, companies are concerned about meeting cash obligations, or expectations, when cash is at a premium. Traditional equity compensation program designs have been shown, for the third or fourth time in the past twenty years, to have critical flaws that can wipe out value with no-fault, or magnify value with little effort.

If all of this was happening in some other aspect of your life, you would be compelled to make some big changes. In the world of compensation, most companies seem content to wait things out and hope everything “returns to normal.” This is the real opportunity. It far easier to win when your competition is complacent.

As in every extreme situation, a few will seize the chance to exploits their competitors' weaknesses. In 2022 and 2023 we will all read about the companies that rolled out expansive changes to their total rewards while the pandemic raged. We will attend presentations and webinars with case studies about companies who corrected their diversity equity and inclusion issues, or how base pay increases became a driver of success instead of a baseline marker. We will envy those companies who made changes and we will try and create programs “just like theirs” (but two years too late.)

Perhaps you will call me or some other consultant and ask how so-and-so built the award system that has proven to be the trend-setter for the next decade. Even better, perhaps you will be the person presenting the case study because you decided that this year was motivating enough to inspire more than a haircut. You will be at the front of the pack, healthy, strong, and leading the way, while others wonder how you did it. Haircuts are easy. Transformation is not. But transformation is achievable and there is literally no better time than the present to get started.

Dan Walter is a CECP, CEP, and Fellow of Global Equity (FGE). He has convinced himself he is a “Compensation Futurist” and works as Managing Consultant for FutureSense. Dan is also a leading expert on incentive plans and equity compensation issues. He has written several industry resources including the only resource dedicated to Performance-Based Equity Compensation. He has co-authored ”Everything You Do In Compensation is Communication”, “The Decision Makers Guide to Equity Compensation”, “Equity Alternatives” and other books. Connect with Dan on LinkedIn. Or, follow him on Twitter at @DanFutureSense.