[Comp Alert May 2018] Tax Reform’s Impact on Compensation

Late last year, Congress passed and President Trump signed into law the Tax Cuts and Jobs Act (TCJA). The sweeping tax reform law reduces the marginal corporate tax rate at the federal level from 35 percent to 21 percent. This and other changes to tax law are boosting profits and will save businesses billions in taxes this year. So, how are they spending all that money?

Most companies are reinvesting their tax savings in strategic ways that drive business performance. So far, shareholders are reaping the greatest rewards, according to an analysis by investor Paul Tudor Jones’ Just Capital. Job creation is the second largest area for investment with 20 percent allocated. Jones’ nonprofit is tracking spending by companies in the Russell 1000; 133 companies have announced their intentions to date.

In addition, a recent Ernst & Young (EY) survey finds most employers are either planning to or have already made changes to enhance compensation through bonuses, salary increases and other pay benefits. Seventy three percent of companies surveyed expect to accelerate mergers and acquisitions.

Considering these and other trends, now is a good time to revisit your business compensation strategy to take advantage of opportunities that effect employee pay. Before making any long-term decisions, however, let your company’s business goals be your guide so that tax savings are invested where they will do the most good.

Making Tax Reform Pay

Tax cuts have contributed to growing optimism about the U.S. business outlook. And that optimism has translated into a strong economy.

Still, companies must be nimble to adapt to changes in the new tax law. Making the right strategic moves on where to invest tax savings requires thoughtful planning. Here are a few areas to consider:

1. Equal Pay – As more people keep a close eye on the pay gap, employers everywhere are working to eliminate wage discrimination based on sex, race, age, disability and other classes protected by federal laws. In this environment, they are evaluating how they can structure their compensation system so that it works for all employees. This means developing policies and compensation strategies that reward people performing well in the same jobs with similar work experiences, skills and education equally.

Yet, implementing changes means choosing a structure that pays internal employees fairly and is competitive externally. Consider using a portion of the tax break to identify any anomalies in your compensation structure. Then, develop solutions to pay disparity that can be implemented in phases over a reasonable time-period, as budget allows.

2. Shareholder Return – Shareholders who have invested in your organization expect a fair return. You can pass along tax savings to shareholders with an increase in dividends. This can take the form of a one-time payment or an increase in the quarterly rate. Another option: share buybacks.

3. Business Expansion – Companies who want to expand geographically, diversify product offerings or tap into new customers may choose to invest their tax savings in a merger or acquisition. With M&As, compensation programs must also be merged. Make sure your compensation strategy includes these important elements:

  • Competitive Pay Analysis – As the market for top talent gets tighter, attracting and retaining employees gets more challenging. This may be a good time to revisit the competitiveness goal defined in your organization’s overall compensation strategy. Consider using the tax reduction to fill in pay gaps. Look at national, regional and local market trends. Increases may be either to the entire organization or to select segments where compensation has increased faster than overall market wages.
  • Base Salary – The annual salary measures ongoing job worth and ongoing job performance. Under the TCJA, the performance-based compensation exception to executives $1 million pay cap has been eliminated. Now, compensation for the CEO, CFO and the three other highest paid executives is capped at $1 million regardless of whether compensation is performance-based or not.
  • Annual Incentives or Bonus Plans – These reward executives for reaching annual milestones or other incentivized, short-term financial goals. Cash is still the dominate incentive for private companies. Be sure to set goals for profitability or revenue growth as key performance measures. In January hundreds of companies announced employee bonuses resulting from the tax reform law. Although the pace of these announcements has slowed, more and more companies are following the national bonus pay trend.
  • Long-Term Incentives – This incentive rewards executives who create long-term value, a win-win for all when strategic objectives are met. You will also want to specify the length of the performance period, eligibility requirements, incentive opportunities, performance measures, and the payout or holdback schedule.

Whether your business is small and closely held or ranks in the Fortune 500, the new tax law will have wide-ranging implications for your compensation plans in 2018 and beyond. Please contact me at (847) 921-2812 or nlappley@lappley.com if you would like to discuss further. Also, feel free to share this article with anyone who might be interested.

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[Comp Alert September 2017] How to Communicate a Total Rewards Package

In today’s competitive employee marketplace, effective communication of your total rewards package can help be the determining factor in securing high performing employees.

A total rewards program is made up of several elements including compensation, benefits, recognition, performance management, talent development, and work-life effectiveness. There is much to consider when developing and understanding complicated rewards programs. That’s why it is so important to communicate them effectively.

Here are some elements of communicating rewards.

Include All Elements

It’s a mistake to communicate only compensation or pay elements of the reward package. As noted above, rewards include other elements than just compensation. Employees often have the mindset that they are doing a job and their organization is paying them to do it. They overlook the other investment their employer is making in them.

So highlight what your company is doing to support their employees other than just what they receive in their paychecks. As a result, if employees recognize what their company is doing to support them, there is a better chance that they will feel a greater emotional connection to the organization.

Bring it Down to a Personal Level

Start the conversation or presentation with more general items. Lead with a discussion of the organization’s business strategy and culture and show how the rewards programs support that strategy and culture. Explain the company’s human resources strategy and how compensation philosophy is an integral part of that strategy. Then discuss how individual employees are part of the overall strategy and culture and how they contribute to that strategy.

Be Rigorous About Details, Documentation, and Data

Each organization has preferred levels of transparency. But continue to tie communications to the company’s compensation philosophy. Explain how, when, and why the company makes decisions as it does, and plan to talk about them regularly, from one-on-one conversations to all-hands meetings. Outline your approach to gathering and analyzing data, which both provides clarity and ease any suspicion that there is bias at play.

Leave no ambiguity as to how individuals can increase their earning potential. And provide a total rewards statement, whether it a report you generate from your compensation software or a simple spreadsheet or word document. Create a report that lists the rewards each employee receives.

Provide Manager Training

Managers are the front line for explaining and administrating compensation. It’s often their decisions that affect salary increases and bonus/incentive payments. They need to be confident about having tough conversations about pay with employees. So arm them with details to explain the organization’s programs and the information need to back up their decisions.

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Contact Neil Lappley to discuss communicating rewards programs or share this post with anyone who may also be interested in these projections.

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[Salesforce Compensation] September 2017 It’s Review and Planning Time

It’s Review and Planning Time

In this issue of the Salesforce Alert newsletter, my colleague, Tim Weizer, presents some key questions that need to be answered in reviewing a salesforce incentive plan.

The Sales compensation review and planning season is upon us. The focus on sales compensation is understandable as selling is, by far, the most expensive part of strategy implementation for most companies.  Five times the expenditures on all media advertising; 20 times larger than the money spent on all online marketing and advertising in 2013.

Here are some questions to ask.  Focusing on these areas can help determine whether you have areas of concern.

#1.  IS THE BIG PICTURE CORRECT?

In today’s fast paced world, quality often is not given enough emphasis over a quick answer.  A holistic approach is needed to ensure that proper time and thought are given to plan design and any potential unintended consequences. As one CEO remarked that the company took its time to ensure “…we didn’t have sales compensation becoming disconnected from the overall financial result of the business.”  The CEO wanted to ensure that the company was paying for the right strategic results.

The basic premise is that a sales compensation plan does not exist in a vacuum.  It needs to be closely aligned with the company’s business and marketing strategies and goals.  Also, the plan must address both internal and external forces impacting the sales job and selling process.

#2. ARE THE PLANS PROPERLY CALIBRATED TO THE VARIOUS SALES ROLES?

Setting the same percentage of base salary as the incentive for target performance for all sales positions is often evidenced in plans.  This may be a serious mistake.

Careful sales job analysis should be undertaken to properly reflect each position’s impact and influence on a sale.  This analysis then becomes an important part of determining the right pay mix per sales role in your company

#3.  DOES THE CFO HAVE CONCERNS?

When the design allows too many sales reps to max out on incentive earnings, the CFO may be anxious about the inherent risk in the plan’s design or to “pushing” fourth quarter sales into the first quarter of next year.   While 60 percent of the salesforce should achieve quota or above, a recent survey stated that only 4 percent, on average, maxed out.  If your result is significantly higher, then multiple analyses should be conducted to determine the reasons (e.g., Quota and territory design analyses).

#4.  IS THE PLAN UNBALANCED WITH TOO MANY MEASURES?

While communicating management’s goals to the field, too many measures or objectives result in the measures receiving little or no attention.  Four should be the maximum number of incentive measures.  This statement is backed up by a Hay Group survey of 700 companies that reported 85 percent of respondents had 4 or fewer incentive measures. Also, any single incentive measure or objective accounting for less than 15 percent of the targeted incentive opportunity is simply wasted. A good idea would be to review the actual percentage of your salesforce that achieved 100 percent or more of quota per measure.

#5.  ARE THE PLANS TOO RISKY?

To quickly increase sales, a company may decide to provide a higher leverage of incentive to total cash or an uncapped incentive opportunity versus the past design.  This action may produce significant risks in terms of cost control, uneven production scheduling, or even upset key customers due to delivery issues.

#6. WILL ASC 606 IMPACT THE PLANS?

New Revenue Recognition Standard requirements go into effect on December 15, 2017 for public companies and the end of 2018 for private companies.  Companies in industries such as Aerospace and Defense, Automotive, and Engineering and Construction are likely to be impacted given their use of long-term contracts. Take a moment now to ask your CFO if ASC 606 impacts your sales compensation plans.  If so, find out what data the CFO needs from you to address this topic. Also, investigate if the timing of incentive payments may need to be adjusted.

To learn more or discuss your sales compensation concerns, please contact Tim Weizer at tim@salescne.com or Neil Lappley at nlappley@lappley.com.

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[August 2017 Comp Alert] Projected 2018 Salary Increases Survey Results

According to the WorldatWork’s annual Salary Budget Survey, survey participants are planning a slight rise for salary increase budgets to 3.1 percent for 2018, up from 3.0 percent this year.

With a tight job market, low unemployment, inflation seemingly under control, and reported employer financial gains, a larger growth in salaries might be expected. There are other factors that might explain the plateau in growth, including the increased use of variable pay and the use of non-cash rewards, or an overall more conservative pay philosophy. It is also important to keep in mind the impact of several important regulatory actions have had on salaries: the rising minimum wage in certain regions and the overtime rule. It’s entirely possible that these changes have not been reported as a salary budget increase in some cases. While the overtime rule has been blocked, many organizations had implemented the changes and chose not to undo them. So the picture may be brighter for the workforce than it appears.

Keep in mind that salary increase budgets may vary by industry and geography location. The WorldatWork survey showed this year that there was little variation between states, ranging between 2.9 and 3.1 percent. There appears greater variation by metropolitan area, ranging from 3.0 to 3.3 percent. Highest budgets are reported by high-tech areas.

Selected Survey Highlights 

  • Base salary increases are being awarded to 89 percent of employees in 2017.
  • Promotional increases were awarded to 7.9 percent of employees in 2017. The size of the average promotional increase remained unchanged at 8.4 percent.
  • The percentage of organizations using variable pay increased by one percentage point to 85 percent in 2017.  This increased use of variable pay has been seen for several years and likely reflects organizations looking to further their pay-for-performance philosophy, without adding to fixed costs.
Nonexempt
Hourly		 Nonexempt
Salaried		 Exempt

Salaried

 Officer/

Executives
Average percent
budgeted 2017		 5.0% 5.0% 13.0% 35.0%
Projected percent paid 2017 5.0% 5.0% 12.0% 35.0%

Employees are still seeing increases in pay through improved variable pay plan payouts.

Retention of Critical Workers
As we have reported earlier, employee retention is a significant concern to many employers. It appears that efforts to retain workers, particularly high performers, high potentials, and critical skilled workers, may need to be ratcheted up. From findings of a study by Spherion Staffing, employees seem more willing to test their options. The study reported that 25 percent of workers planned to look for a new job in the next three months. At the same time, 35 percent plan to do the same in the next year.

With an improved economy and overall job market, employees believe they have more options available. As such, they believe they can demand a higher salary from their current employer or a competitor. Twenty percent cited compensation as the primary reason they plan to explore their option, more than any other employment factor.

Some workers believe their employers do not appreciate their contributions, making them more likely to move to a new company that will. Feeling undervalued topped the list of non-financial factors workers gave for their interest in exploring alternative job opportunities. At the same time, 23 percent of employees felt their organizations were putting less effort in to retain them than last year.

Contact Us
 Please contact me at (847) 921-2812 or at nlappley@lappley.com to discuss planned compensation actions for 2018 and forward this email to anyone who may also be interested in these projections.

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[July 2017 Comp Alert] Variable Pay: What’s Ahead

Variable pay has evolved greatly over the past five to 10 years, and is expected to change more in the future. However, variable pay programs and changes to them have not occurred without challenges.

Prior to the 1970s, the concept of the annual bonus was primarily reserved for the executive level and based on discretionary payments for accomplishing individual objectives. The need for employers to better control their fixed costs led to variable pay in the broader workforce. Organizations also saw that these programs were effective in focusing employees on critical objectives, motivating the achievement of desired results, influencing the way they performed their work, and helping to better align programs and work efforts with the organization’s mission and strategy.

What’s New?
Variable pay has been on the leading edge of one of the foremost changes in compensation philosophy since formal compensation programs were introduced. It has been driven by shrinking expenditures on salary increases, rising cost of employee benefits, and large increases in funding and expenditures on broad-based employee bonuses. Since variable pay increases do not add to, or compound, future costs and are usually dependent on performance results, companies have expanded their overall compensation investment with greater spending on variable pay.

During the past 25 years, salary increase spending has been cut in half (from 5.5 to 2.8 percent of payroll), while funding for bonuses has tripled (from 4.2 to 12.8 percent of payroll), according to AON Hewitt surveys from 1990 to 2017. Variable pay has filled the gap this created in compensation growth.

The shift in spending from salary increases to variable pay has been in parallel with the expectation that bonus programs would become much more important for achieving pay for performance. Initially, broad-based bonus programs focused mostly on organizational goals. Profit-sharing and gain-sharing plans were early examples. In recent years, there has been a drive to create a stronger line of sight in variable pay plans by incorporating greater managerial discretion and a greater focus on individual performance.

What’s Next?
Recent trends and approaches in variable pay programs show several future directions. Organizations will break away from one-size-fits-all plans to ones that have a small common enterprise-wide component and varying measures and weights intended to better measure the performance of a business unit, function or department. Calibrated plans will take the place of homogeneous plans, and we will see more winners and losers within the organization based on different levels of achievement.

Greater use of qualitative measures will also increase. Early generations of incentive plans relied heavily on quantitative measures. There is a growing recognition that critical outcomes and employee behaviors can be enticed by programs that do not use quantitative formulae. However, these qualitative measures may not be always precisely measured.

In the future, almost all variable pay programs will increase or decrease payouts based on individual performance achievement. In the next 5 to 10 years, this will become a mainstay in pay for performance plans.

Levels of spending on broad-based variable pay plans will also continue to increase as organizations expect it to continue to grow. This will most likely be the result of shifting funds from other rewards programs, such as salary growth and some benefits programs.

What’s Challenging?
Variable pay programs have their difficulties. Many organizations struggle to identify the right measures and weightings. Some have too many measures, which leads to diluting their relevance. Some have too strong a reliance on quantitative goals, where measuring outcomes qualitatively may better represent the organization’s strategic goals. And some are stuck on historical measures that have been used in the past and are unwilling to give them up.

More organizations are implementing an individual pay for performance component to their programs. But according to the recent AON Hewitt survey, employers have had no greater success in differentiating rewards by performance level than what they have experienced with their salary programs. The keys to successfully implementing a pay for performance component of variable pay plans is the quality of goal setting, manager training and accountability for differentiating, and the ability to define differences in employee performance.

Effective communication of variable pay continues to be an area of difficulty for organizations. Employees must know what is expected of them, and it should occur at the beginning of the planned year. Additionally, it is critical that employees receive feedback throughout the year. Furthermore, periodic feedback of results vs. organization-wide goals should occur at least quarterly.

Evolving Role of Variable Pay. In the past two decades, variable pay has gone from applying to only the top executives to the primary driver of pay for performance for all employees in the organization. The concepts of variable pay continue to evolve as organizations push them down further in the organization. What will not change is the growing importance of variable pay and the expectation for shaping employee behaviors and motivating the achievement of key business outcomes.

Please contact me at nlappley@lappley.com or (847) 921-2812 to discuss any comments or questions you may have regarding the implementation of variable pay programs in your organization. Feel free to forward this email to anyone else who may be interested.

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[June 2017 Comp Alert] Compensation Strategy: How to Develop

Compensation Strategy: How to Develop
Last month’s Compensation Alert discussed the importance of having a compensation strategy. In doing so, we posed three questions that organizations need to know:

  1. Are your compensation programs competitive? To answer this question there is a need to answer the question of:
  2. Are compensation programs doing what you need them to do? And to answer this question the question needs to be answered:
  3. What does your organization want its compensation programs to accomplish?

Compensation strategy is part of a company’s human resource strategy and should be integrated with all other elements of human resources. External factors, such as, trends in supply and demand for talent, customers, markets, and challenges affect where an organization is. Internal factors, such as core competencies, values, culture, strategic initiatives, and skills of current employees additionally affect an organization’s human resource strategy.

Compensation strategy is used to design new programs, evaluate existing programs, and communicate programs.

How to Develop a Compensation Strategy: This month’s eNewsletter will discuss the steps to develop a compensation strategy. Development begins by gathering information from several sources:

  • Obtaining information and perspectives from stakeholders including directors, executives, managers, employees and customers.
  • Considering the organization’s business strategy and human resource strategy, and its stage in the business life cycle.
  • Benchmarking the organization against competitors for both employees and in business. This involves understanding an organization’s relative positioning, but not necessarily blindly following. It also considers the economics of the business. Then deciding what’s best for the organization.
  • Developing an initial trial strategy and testing it with stakeholders.
  • Implementing, monitoring, evaluating and revising.

Understanding competitiveness begins with defining the markets where the organization competes for talent and business. The market typically will vary by level and perhaps by function. It incorporates geography including local, regional, national and global. It will also typically vary by industry and occupation or profession.

Market competitiveness target is a key element of an organization’s compensation strategy. Considerations to position at less than the market median include: stable environment, great reputation and opportunity, high benefits, high scrutiny, affordable area, not-for-profit, plentiful supply of desirable employees, and currently paying below median. Considerations to target above the market median include: currently have great employees and recruit only the best, need particular skills short in supply, unstable employment history, less desirable geography, high cost of living area, highly profitable, and currently paying above median.

Base salary has an important role in compensating employees as it provides ongoing job worth and reflects ongoing performance. Design elements include salary range width, how the organizations expects its employees to move through a salary range, the purpose of each segment of the range, and whether differentials or special short-term ranges are to be used.

Annual incentives are meant to reward annual performance. Elements to consider include eligibility, incentive opportunity, performance measures, performance feedback schedule to participants, and payment or holdback schedule.

Long-term incentives, in contrast, are meant to reward a longer performance cycle. Design elements include length of performance period, eligibility, incentive opportunity, performance measures, performance feedback schedule and payment or holdback schedule.

There are several ways that compensation strategy should be used. Your compensation strategy can help in:

  • Designing new programs
  • Evaluating existing programs
  • Communicating programs

Contact Us

Please contact me at nlappley@lappley.com or (847) 864-8979 to discuss any comments or questions you may have regarding the importance and how to develop a compensation strategy.

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[May 2017 Comp Alert] Compensation Strategy: Why It’s Important

As I meet with executives and senior managers, they increasingly want to discuss the returns that their organization is receiving from compensation. They are looking less at employee compensation as a cost and more as an investment. They pose the  question: What is our return on investment from compensation? 

The first step in deciding the impact of compensation is to develop a compensation strategy. This month’s Compensation Alert will discuss the importance of a compensation strategy. Next month we will address how to develop a strategy.

Compensation strategy is important. Organizations need to know:

  1. Are their compensation programs effective? To answer this question, there is a need to answer the question of:
  2. Are compensation programs doing what we need them to do? And to answer this question the following question needs to be answered:
  3. What does an organization want its compensation programs to accomplish?

Compensation strategy is the answer to the last question. Strategy is a statement of what we want compensation programs to accomplish.

Compensation strategy is part of a company’s human resource strategy. External factors such as trends in supply and demand for talent, customers, markets, challenges and business opportunities affect where an organization is. Internal factors such as core competencies, values, culture, strategic initiatives, and skills of current employees additionally affect strategy.

Compensation strategy has several elements:

  • Program objectives: what is the organization trying to achieve?
  • What will the organization pay for? For instance, how important is pay for performance?
  • What markets are being used to compare the company? What type of business, geography, size of organization, competitors?
  • How competitively should the organization pay: median, above average, below average?
  • What programs are being offered to what part or parts of the organization?
  • At each level in the company, what is the right mix of programs?

Compensation strategy provides a road map. If you don’t know where you are going, how do you know when you get there? What road to take? It sounds both obvious and somewhat corny, but an organization needs to know where it wants to go in order to plan effective routes, monitor progress, and know when it has arrived.

Compensation features cannot be effective without reference to desired outcomes. How does the organization know if it’s is spending the right amounts, to get the desired results?

There are several ways that compensation strategy should be used. Your compensation strategy can help in:
•    Designing new programs.
•    Evaluating existing programs.
•    Communicating programs.

Compensation strategy focuses on both what is to accomplished and how it will be accomplished.

Next month’s eNewsletter will address developing a compensation strategy.

Contact Us
Please contact me at nlappley@lapppley.com or (847) 864-8979 to discuss any questions you may have from this eNewsletter. Feel free to forward this email to anyone else who may be interested.

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[April 2017 Comp Alert] Why Pay Equity Matters

Pay equity is an important consideration for employers today. Unfortunately, it’s not something that happens easily. In fact in a recent study we came across, just over a third of respondents had in place a process to address pay equity issues. Addressing this important concern requires a well-considered process to ensure that individuals doing the same job, with the same skills, and level of proficiency within those skills, are paid equally. And pay equity is not only good for the individuals impacted, but has been shown to have a positive link to overall engagement, turnover, and customer service metrics.

Pay equity isn’t just about fairness. It’s about creating an environment that fosters employees to focus on customers, rather than comparing salaries with coworkers. It’s also indicative of a culture that values its employees and is committed to giving them visibility into the process that impacts compensation. This visibility leads to an excellent employee experience, which in turn leads to an excellent customer experience.

Hiring

The marketplace for talent is increasingly transparent. Between the wealth of information online and the ease with which people can connect and share information on social media, bad employers have nowhere to hide. Taking a strong position on pay equity can help a company’s brand in the marketplace.

The equity focus is also indicative of a culture that embraces diversity of all skills, competency and performance, taking an active role ensuring multiple perspectives are given equal credence.

Turnover

Turnover is costly, disruptive and potentially damaging to the employer’s brand. Although turnover will vary by industry, all organizations want to keep their good employees longer. Compensation, and in particular, equitable compensation, according to all surveys, is a significant factor in retention.

Organizations unable to retain talent face a number of challenges, from impact on productivity and morale, to eroding levels of customer service. Obviously, a formal focus on pay equity is not the only factor to impact turnover. But when organizations focus on things that matter to employees, they reap the benefits of employees that stay with the organization.

Engagement

Engagement has become a critical business metric, linked to everything from revenue to customer experience to organizational alignment. And there is no question that compensation matters to engagement. For instance, a recent study showed that the number one component of engagement and retention was compensation.

Performance

Of course, the goal of HR strategy, including compensation, pay equity, and engagement is to drive business performance. It has been shown that organizations that achieve above average engagement levels for their industry were twice as likely to also achieve above average levels of productivity. In addition, they are two and one-half times as likely to have achieved or exceeded revenue goals.

Conclusion

Pay equity is an important mindset for organizations and the workforce as a whole. When employees are treated fairly and equitably, it builds trust, which leads to engagement, retention and performance. It removes difficult conversations between managers and employees, and it allows focus on the work at hand.

Contact Us
Please contact me at nlappley@lapppley.com or (847) 864-8979 to discuss any questions you may have from this eNewsletter. Feel free to forward this email to anyone else who may be interested.

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[March 2017 Comp Alert] Cost of Not Paying to Market

Low unemployment and a looming labor shortage means employers have to work harder to attract and retain top talent. Across gender and education levels, salary and benefits are the most important factors when job seekers are choosing an employer, according to research conducted by Randstad North America. 

It is becoming a candidate-driven market again, and job seekers have more tools to determine if they are getting paid what they’re worth.

A recent survey by Gallup asked the question: “What do workers want most out of their job and their company?” The answer can help companies develop better retention strategies. It can also give insights into why employees may join the organization.

Gallup asked employees how important certain attributes are when considering whether to take a job with a different organization. Although the reasons for changing employers are often multi-faceted and typically include the ability to do what they do best and greater work-life balance, a significant increase in compensation is one of the most important reasons.

A Significant Increase in Compensation

Roughly four out of 10 employees (41 percent) say a significant increase in pay is “very important” to them when considering a new job. Specifically, more male employees than female employees say this factor is “very important”. Not surprisingly, more millennials and Gen Xers, than baby boomers, rate this factor “very important” in a job search.
Income matters to people, and organizations cannot overlook its importance. Organizations should ensure that managers have conversations with candidates explaining in great depth the company’s compensation strategy and how compensation programs work.Retaining Current Employees
At the same time organizations must focus on retaining current staff, particularly top performers and high-potentials. Most companies address this in several ways:

  • Developing a Compensation Strategy – Organizations develop a compensation strategy to better understand how pay supports the overall strategy and culture of the company.  A compensation strategy will describe targeted levels of competitiveness for salary, incentives and benefits; the organization’s approach to pay for performance; and how pay programs will be communicated.
  • Compensation Market Competitiveness – Companies regularly assess the competitiveness of their compensation programs by comparing themselves to market. Consideration is given to who they compete with and who they hire from and lose employees to.
  • Salary Plan – As my colleague Rich Sperling and I have stated in our presentations to senior management and human resource groups, merit increases to top performers and high-potential employees ought to be at least twice the amount given, on average, to fully-competent employees. For example, with an overall salary increase budget of 3 percent, 20 percent of employees can receive an average of 5 percent, while the remaining 80 percent receives an average of 2.5 percent.
  • Incentive Compensation Programs – Companies are slowing moving to increasing the number of variable pay plans for two important reasons: 1) to reward employees for achieving corporate-driven objectives, and 2) to reduce fixed costs.
Now is a good time to review your organization’s compensation strategy and determine if its goals are being met. If yes, great and continue on track. If not, re-evaluate your compensation strategy to determine if it remains appropriated and review pay programs to ensure they are in accord with your strategy.

Contact Us
Please contact me at nlappley@lapppley.com or (847) 864-8979 to discuss any questions you may have from this eNewsletter. Feel free to forward this email to anyone else who may be interested.
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[Q1 Salesforce Alert] Case Study: Achieving Results–Aligning the Sales Strategy with a New Marketing Strategy

“Don’t sell me products. Instead, lead me to 
solutions that incorporate your products.”
(Vice President of a strategic account)

In this issue of the Salesforce Alert newsletter, my colleague, Tim Weizer, shares a case study regarding a strategic change that helped achieve effective salesforce results.

The senior sales executive of a middle-market financial services company was puzzled. Key accounts of the firm had often said they were satisfied with the company. Yet the company failed to achieve one of its major objectives: getting deeper penetration of those accounts with a new marketing strategy emphasizing new products.

Individual interviews were conducted with selected key accounts at the vice president level. The answer to the puzzle was expressed clearly by one strategic account. “I want your salesperson to know me, my business, and how your products can provide solutions to my problems,” he said. Strategic accounts now demand this value proposition from their major suppliers.

Here are the five steps the company employed to address the situation.

Step 1. Know where you stand before you embark on addressing this situation. The company had interviews conducted with customers and executives at both the vice president and operational levels to get a clear and factual understanding of:

  • The account’s business as the account sees it.
  • Their business goals.
  • Their problems.
  • How the company is viewed as either a problem solver or a product pusher.
  • How the account’s life would be different if the company no longer existed.

Step 2. Get commitment from the company’s executives that major change in the company is acceptable within the company’s risk-averse culture. Armed with the above strategic account input, the sales executive developed an initial estimate of what additional sales and profitability could be expected from addressing this value proposition. He then got management’s agreement to be open to change the process of how it sells to strategic accounts.

It was clear that without this upfront commitment, no significant change would occur. Without commitment, he knew it would be futile to proceed with any further analysis and financial estimates.

Step 3. Rethink the entire strategic account selling process. This step meant doing a thorough analysis of:

  • The steps involved in the traditional selling process.
  • The time spent with the account’s VP and different operational executives.
  • How well the sales skills/abilities/competencies matched up with the account’s needs.
  • How well the sales organization was managed and rewarded for both existing and new products’ results.

An online salesforce effectiveness survey was included in this step to get the field’s input on a number of topics key to their work with strategic accounts.

The company then developed two options: (1) start a new sales group focused on the strategic accounts’ VP level and add a technical specialist to address questions on the spot, or (2) upgrade the existing senior sales representatives with current new product, technical, and solution selling training. A second and more detailed estimate of additional sales and profitability of each option was prepared.

Step 4. Present each option and a recommendation to the senior management group. Include an implementation plan for the recommended option. The sales executive recommended the formation of a new sales position focused on the VP level along with the formation of the technical specialist position.

In addition, small, cross-functional teams were developed to fully address the value proposition expressed by the strategic account, namely “don’t push product…lead me and my people to an answer.”

HR working with the VP Sales developed a team-based compensation plan for this new structure. Particular attention was given to ensure that the new plan did not create unproductive conflict or misaligned objectives between jobs.

Step 5. Get Started. Begin showing the strategic accounts that you are addressing their value proposition. The sales executive began with a pilot of the new sales position, the technical specialist, and a small cross-functional team. The sales executive also conducted two solid months of training for the team that would be supporting and visiting the strategic accounts.

Results have been better than expected. New products sales to the strategic accounts in the pilot group are up and the teams are working well as a unit.

Contact Us
If you would like to discuss this case study or address any questions, please contact Tim at tim@salescne.com or simply reply back to this email to reach Neil.

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