Pre-IPO Company

Our Services

  • Compensation plan design (Base, Bonus, and Equity Guidelines)
  • Job Leveling and Career Pathing
  • Detailed Implementation and Communication Plans

Executive compensation plans are a must-have for organizations.

A lot of companies have a “nice to have” list—it’s the list of things they know they should have or should get around to, but often get pushed aside in the to-dos of daily company life. One item that is consistently at the top of the “nice to have” list is a solid executive compensation plan. I see this happen especially with family-owned businesses, or companies that generate less than $100 million a year.

Executives in businesses like this are often personally invested in making sure that the company succeeds. But when it comes to their pay, they may feel like they have to “take one for the team” and neglect their own pay package. What happens is that executive pay is often based on uninformed decisions and then rarely re-calibrated over time to adjust to changing markets or company growth. In the end, it’s an outdated executive compensation plan that doesn’t encourage leadership to fully engage with the business or stick around.

Typically, executive pay gets off-track for one (or more) of three reasons:

  1. Base pay is arbitrary and not adjusted over time. Decisions about executive base pay are often subjective, and markets change all the time. Without regular follow up, base pay can quickly become out-of-date.
  2. Bonuses aren’t tied to performance. Not having a well-designed bonus program is one of the biggest mistakes I see with executive compensation programs. It’s either an entitlement program or, even worse, nonexistent. In either case, it’s a lost opportunity to align behavior with business objectives.
  3. Executive leadership isn’t recognized as integral to the company’s success. When executives leave small to mid-sized businesses, it hits hard. Not only is it far more difficult to replace that level of talent and the tribal knowledge they carry with them, but it does major damage to employee morale and the business as a whole.

Not having an executive compensation plan for some of the most mission-critical employees is when that “nice to have” suddenly becomes a something you “really, really wish we had” when your leadership gets burned out and leaves. These are the last things companies of this size want to see happen in their executive department, but without a good executive compensation plan in place, it happens—and when it does, it really hurts.

So how can you make 2019 a successful year for your company? Take your executive leadership seriously, and put “executive compensation plan” at the top of your to-do list. Here are three easy ways to get started:

  1. Develop a strong pay methodology. Use it to guide your decisions around base, bonus, and long-term incentives. Then calibrate it to the market and company goals. Make sure you regularly review and revise when needed.
  2. Develop a meaningful executive bonus program. Great bonus programs are designed to align executive behaviors to drive business objectives (revenue, net profit, etc.). If targets are met or exceeded, the executive is going to reap the rewards. If targets are missed, the executive feels it, and the company is more efficient with its spend.
  3. If executives do decide to leave, make it a very tough decision. Encourage engagement and retention by building in vehicles that stagger equity or cash payouts over years. This makes it clear that if they choose to leave, they’re going to be leaving a good chunk of money on the table.

When an executive compensation plan is clearly laid out and tied to the success of the company, you’ll be amazed at what happens! If you’re ready to cross this off your list, I’d be delighted to serve you. Contact me and find out how nice it can be when your executive leadership’s pay is matched to your company’s performance.

Our Services

  • Compensation plan design (Base, Bonus, and Equity Guidelines)
  • Job Leveling and Career Pathing
  • Detailed Implementation and Communication Plans

Let’s talk!

Got questions about how we can help you?

We are trusted advisors to Silicon Valley’s emerging companies as they design competitive programs and look for tools and support to help them grow their business to the next level.

Don’t hesitate, we are here to help!

1 Step 1
Namefirst and last name
Messagetell us about you needs
0 /
powered by FormCraft

Our Office