It’s no secret that a war for talent has been declared in the tight Houston market. Not only is the energy sector soaking up much of the labor pool, but the growing gap in workers ages 30 to 50 leaves owners worrying over their succession plans and how to retain senior leaders. At CPA and advisory firm Doeren Mayhew's recent client conference, compensation veteran and author Chris Crawford of Longnecker & Associates provided an understanding of the competitive landscape for key talent, best practices for variable pay, evolving regulations on executive pay and how to maximize compensation dollars.

1. Turning Carrots
into Karats
Chris Crawford, President
Longnecker & Associates
Copyright © 2014. All Rights Reserved.

2. Discussion Points
BACKGROUND
• How Total Rewards has evolved into today’s structure
• The war on talent
• The move to variable pay
VARIABLE PAY
• Do bonuses work?
• How do you select the right performance measures?
• How do you set goals and payouts?
LONG‐TERM INCENTIVES – GOLDEN HANDCUFFS
• Vehicle, value, vesting
• Eligibility
• Liquidity
A WORD TO THE OWNER‐EXECUTIVE
• Replacement Value
ALTERNATIVE CURRENCY CONSIDERATIONS
Copyright © 2014.

3. BACKGROUND
3

4. Evolution of Total Rewards
Pay
Total Cash
Total Direct
Compensation Compensation
Total
Rewards
Components
• Salary
• Benefits
• Salary
• Variable pay
• Benefits
• Salary
• Variable pay
• Equity
• Benefits
• Retirement
Benefits
• Salary
• Variable pay
• Equity
• Benefits
• Retirement Benefits
• Employment Agreements
• The Work Experience
• Perquisites
• Time Off
Copyright © 2014.

5. War for Talent
5

6. VARIABLE PAY

7. The Move to Variable Pay
Media Attention
(Haves vs. Have Not's)
SEC wants better
disclosure for Public
Companies
Cost Control
Unparalleled
Corporate
Governance
Market Volatility
Reduction in
Retirement
Benefits
Shareholder &
Employee Scrutiny
Market practices
Copyright © 2014.

8. Do Bonuses Work?
Copyright © 2014.

9. Do Bonuses Work?
• A lengthy review by L&A of over 20 studies and
books published by the major survey houses and
strategy firms concludes the following:
– Companies with Variable Pay Plans have
significantly better corporate performance
– Companies without Variable Pay Plans are
typically in the bottom quartile of performance
– Companies with Variable Pay Plans withstand
economic volatility much better
Copyright © 2014.

10. Do Bonuses Work?
• A lengthy review by L&A of over 20 studies and
books published by the major survey houses and
strategy firms concludes the following:
– Star Performers are more attracted to companies
with Variable Pay Plans
– The replacement costs to stay market competitive
utilizes greater fixed costs like base salaries,
healthcare and pensions, and are a much more
expensive form of currency with far less variable
cost controls
Copyright © 2014.

11. How Do You Select the
Right Performance Metrics?
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12. How Do You Select the
Right Performance Metrics?
Corporate
Mission
Program
Review &
Audit
Business
Strategy
Human
Resources
Philosophy &
Strategy
Variable Pay
Measures
and Payouts
Total
Rewards
Strategy
Variable Pay
Program
Design
Variable Pay
Philosophy
Copyright © 2014.

13. How Do You Select the
Right Performance Metrics?
Long
Line of Sight
Short
Individual
Team or
Workgroup
Org. Unit
Organization‐
wide
Level at Which Performance is Measured
Copyright © 2014.

14. How Do You Set Goals and Payouts?
Copyright © 2014.

15. LONG-TERM INCENTIVES

16. Long-term IncentivesGolden Handcuffs
• Vehicle, Value and Vesting
• Eligibility
• Liquidity
Copyright © 2014.

17. A WORD TO THE OWNER
EXECUTIVE

18. Replacement Value
Replacement Value is the Key!
• An owner executive could be an owner/family
member and go play golf everyday, but you would
have to hire and competitively pay a new executive.
Copyright © 2014.

19. ALTERNATIVE CURRENCY
CONSIDERATIONS
Copyright © 2014.

20. Alternative Currency Considerations
– What’s a Dollar of Base Salary Worth in Benefits,
Time Off, Annual Incentive, Long‐term Incentive,
Retirement Dollars, Short Commute, Free Parking,
Recognition Awards, Fitness Program, Being a part
of the decisions or solutions, etc.
– Survey Your Employees & Tailor your Programs
Copyright © 2014.

21. Alternative Currency Considerations
– Numerous Studies of employees have found the
most important priorities employees want from
their jobs are:
#1 Career/Learning Development Opportunities
#2 Recognition
#3 Competitive Compensation
#4 Better Boss
Copyright © 2014.

22. Alternative Currency Considerations
– Budget 1‐3% of Payroll per year
– Recognition Awards offer greater perceived value
than any other form of total rewards
• Studies have shown that recognition awards
can deliver 3‐4x the value of the dollars spent
– Some Great Ideas for Recognizing Employees
Copyright © 2014.

23. Questions and Contact Info
If you have any questions regarding this presentation, or any other
compensation or corporate governance issues, please contact us.
Longnecker & Associates
Email: info@longnecker.com
Phone: 281.378.1350
www.longnecker.com