Sold! Bidding Wars and New Executive Compensation Imperatives
Salary bidding wars used to define the final stages of wooing a top executive candidate in a seller’s market. Today, whole packages that include flexibility and perks for dual income families, as well as the chance to reap handsome rewards from both the company and in terms of individual success, are rising in importance.
Is it a candidate’s market?
Unemployment was down to 5 percent in the U.S. as of November 2015, according to the U.S. Bureau of Labor Statistics, but the workforce participation rate hovered around only 62.5 percent. To broadly say that it is a candidate’s market would not be true. What is true, however, is that it is most definitely a candidate’s market for exceptional talent at the senior executive and C-suite level.
What does it take these days to win the bidding war for top talent? What drives the final decision to join one company versus another? Does a 5 or 10 percent salary difference clinch this choice? I would argue that while salary is always at or near center stage in the offer, other considerations are fast encroaching on its dominance.
Compensation is king but it’s starting to share the throne
Certainly, hand-in-hand with the rising scarcity of talent are expectations of higher compensation. Traditionally, when considering a new employer, executive candidates expected a significant increase in earnings potential for a job that represents a next step in their career.
Today, that still rings true, due not only to the scarcity factor, but to a more complex web of elements executives now consider before making a move. Spouses’ jobs, geographic considerations, children’s ages and school situations, access to aging parents, friends, and even climate and favorite pastimes factor more heavily into the decision, particularly at a time when they can look around and see peers who appear to “have it all.” To succeed in winning a star, not only may the overall compensation need to be head-turning, but the entire job package must compensate for burdens and losses involved in making a move.
In fact, there are 12 major disruptive trends that are currently affecting leadership recruiting that recruiters need to know about and be aware of for future success.
Sometimes compensation is the easy part. When clients put together the whole package, I suggest a thought process that includes three main components:
1. Always keep the focus on the challenging work, your company’s culture of innovation and empowerment, and the intellectual horsepower of the teams with which they will work.
In short, how will the new position stimulate them and grow their career? If your candidate isn’t also putting this as No. 1, you likely have the wrong candidate. Ensuring that you clearly, comprehensively and enthusiastically communicate their growth, contribution and career-building opportunities is always a front burner task.
2. Consider a very long leash when it comes to the hours worked to reach job performance objectives.
Sometimes clients are still stuck in a mode where they rattle off a list of standard executive benefits, including vacation and holidays, when making an offer. They naturally want the top managers to set an example for their teams and they also want to guard against creating peer group disparities. While valid, the more important question may be whether applying these strictures is relevant when candidates at this level possess proven motivation and life management skills?
Part of the tradeoff most professionals face for being available 24/7, electronically or by phone, is trust in their judgment to appropriately decide when they need to be on-site for meetings and task-related reasons, and that they will be sensitive to perception and setting examples.
Flexibility is sharing the throne with salary. In fact, a WorkplaceTrends.com survey of 1,087 professionals found workplace flexibility to be the most important benefit for 75 percent of respondents. Extending trust that vacation and other time off “as needed” will not be abused by an ambitious executive is low-risk, establishes a valuable precedent and puts ends firmly above means.
3. Customize the whole package as much as possible.
Just as removing restrictions on work hours can help turn an offer to gold, tailoring an executive compensation system that entices and incentivizes each leader per his or her unique needs and performance objectives is a must in a candidate’s market. Creative compensation packages today include:
– Aggressive incentive schemes (pay for agreed-upon performance measures that vary with the position: profit margin increases, development of new products, expanding to a new market, etc.)
– Meaningful equity participation (options and/or RSU’s)
– Sign-on bonuses: a rising trend, especially when off-setting any “leave behind” the candidate may incur
– Executive housing to support long-distance commutes or provide help in relocation, spousal job search assistance and services that help acclimate the family to the new community
– A competitive complement of insurance plans that are geared to the age and family status of the individual executive
– Time- and hassle-saving perks that free the executive to focus on position goals (company cars, tax and financial planning services, even dry cleaning!)
Companies demand increasing creativity and agility from executives to keep up with a marketplace where technology drives change at a breakneck speed. Those that respond with similar agility to addressing candidates’ lifestyle needs come out on top in the bidding war to woo top leadership talent.
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