Competition in the talent market and your compensation program

by on June 30, 2009 · 0 Comment POSTED IN: HR Info Center

An effective compensation program is essential for you to stay competitive

Trying to understand the talent market; where are we recruiting people from, where do we lose people is very important if we find that people were migrating to one of our competitors. Well, what are they doing – in their compensation program or other forms of business that makes them different than us? And maybe there’s something we can learn from what they’re doing here, you know, when there’s no reason to come out and be completely original in coming up with this.

Understand your compensation program and the market impact
The first is, try and understand what’s going on around you and see what could be going on and what could be best for us there. As we try and look at the market and what other people are doing, we want to understand what kind of vehicles do they use; what kind of design features that they do?

The differences between public and private corporations and their compensation program
We will often find that a compensation program are to be different between the two. The main difference that comes through is in the form of long-term compensation. And that’s simply because private companies don’t have a public market for their stock and absence of public market for their stock often can’t afford to provide the same kind of outside opportunities where the public company might be able to do since the stock option is paid for by the market is, as when one exercises and cashes out that way. So, what we want to understand is what are the differences that could end up being there.

Compensation program metrics allow for comparisons
Develop a group of comparatives within a similar industry, or industries that people are admiring in some cases. We may say there’s a difference between large pharmaceutical companies and generic pharmaceutical companies and maybe the two work together and maybe they don’t exactly but let’s look at both of those groups to understand who might be doing vehicles or have designed features that make the most sense.

In most cases, we don’t get overly concerned about the size of companies. We’re just looking for who’s doing best of breed kind of things and doing more if it makes the most sense – also, companies that are in similar circumstances,
And the other one is- what would you like to be like? Where do you position yourself wanting to be in the future? I’ll tell you that, that kind of discussion used to work very, very well 20 years ago and it doesn’t work in today’s environment as well where shareholders and other people looking at compensation are much more focused on “How did you perform and that’s how I should be paying you.”

But with regard to the kinds of vehicles that are being used, maybe we can find that some companies have a compensation program that has a little bit more risk with a lot more upside and that drives the right kind of behavior. So, you know, don’t be shy in terms of figuring out who might make sense in order to look at.

Edited remarks from the Rapid Learning Institute webinar-Executive Compensation: What Worked and What’s Fair by Steve Hall

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