Top 5 Keys to Help You Determine Executive Compensation

Executive compensation is very important to the success of your leadership team. Executives who are improperly compensated may not have the incentives to perform at their best, and they are more likely to leave your company to join a higher paying competitor. Getting it right, however, can mean that you attract and retain the best executives, allowing you to surpass objectives and increase shareholder value.
 
1. Peer Comparison
Low salaries can be demotivating, but a high salary is not necessarily motivating. Executives will learn what their peers are making, and the relative value of his/her package compared to their colleagues could have an important bearing on your employee’s job satisfaction. That’s why it’s important to remain aware of executive compensation market trends for your specific industry.
 
While many countries now require public companies to disclose their executive compensation packages, private companies and companies operating in countries where disclosure is not mandatory mean that actual executive compensation often remains murky. An executive search consultants work with companies across the industry, meaning that they have the right information and data to make an educated decision on current trends for executive compensation within your market.
 
2. Create a Personalized Package that Meets Your Needs and Those of Your Executives
There are many forms of executive compensations that offer a variety of tax benefits and incentives. These range from cash compensation, option grants, and deferred compensation, to long-term incentive plans, retirement packages, and executive perks.
 
By acting as a third-party  and establishing a conversation early on about the expectations and goals of your top performers, an executive search consultant can help you create a package that meets and exceed his/her expectations, while lowering your costs and maximizing shareholder value.
 
3. Stay aware of Laws and Regulations
A number of countries and jurisdictions have passed new laws and regulations limiting executive compensation or banning a number of compensation practices. Other jurisdictions now require an explanation of how the executive compensation was determined.
 
Working with an experienced executive search consultant who has strong ties to a country or region can help you avoid many of the legal and regulatory pitfalls created by this new environment, while allowing you to remain competitive through the use of mutually beneficial compensation packages.
 
4. Choose your Performance Metrics Carefully
It is generally accepted that a significant amount of a senior executive’s compensations should be “risk” and based on performance. Performance should be based on key business metrics that align with the company strategy and cover the correct period of time over which this “risk” should be assumed.
 
LIASE Group consultants have years of experience in the automotive industry. Working across the industry, they’ve seen a wide variety of performance metrics being used and can help you select the best solution for your particular situation.
 
5. Be Strategic About your Compensation Structure
As we stated above, people will gossip, and you can’t necessarily expect your compensation packages to remain secret within or outside organizations. Your compensation packages should remain equitable and your strategy should be well understood by your management team. At the same time, it is important to have a talent development plan and a talent pipeline in place to ensure the long-term success of your company. You might have to offer more to particularly important or high-potential executives to ensure successful management transitions and the ongoing success of your operations.
 
LIASE Group has the experience and expertise needed to help you create a talent management plan. As an independent third-party, we have the distance necessary to help you identify which executives are the most important for the future success of your strategy.

To continue thinking about the role of money and salaries in our lives, we’ve prepared a 6 minutes audio segment discussing the subject. The following will discuss how money motivates us? What is the real meaning of money? And, money and culture. Enjoy!!