Turning Carrots 
into Karats
Chris Crawford, President
Longnecker & Associates

Copyright © 2014. All Rights Reserved.
Discussion Points
BACKGROUND
• How Total Rewards has evolved into today’s structure
• The war on talent
• The move to vari...
BACKGROUND

3
Evolution of Total Rewards

Pay

Total Cash
Total Direct
Compensation Compensation

Total
Rewards

Components
• Salary
• B...
War for Talent

5
VARIABLE PAY
The Move to Variable Pay
Media Attention
(Haves vs. Have Not's)

SEC wants better
disclosure for Public
Companies
Cost Con...
Do Bonuses Work?

Copyright © 2014. 
Do Bonuses Work?
• A lengthy review by L&A of over 20 studies and 
books published by the major survey houses and 
strateg...
Do Bonuses Work?
• A lengthy review by L&A of over 20 studies and 
books published by the major survey houses and 
strateg...
How Do You Select the
Right Performance Metrics?

Copyright © 2014. 
How Do You Select the
Right Performance Metrics?
Corporate 
Mission
Program 
Review & 
Audit

Business 
Strategy

Human 
R...
How Do You Select the
Right Performance Metrics?
Long

Line of Sight

Short
Individual

Team or 
Workgroup

Org. Unit

Org...
How Do You Set Goals and Payouts?

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

Copyright © 2014. 
A WORD TO THE OWNER
EXECUTIVE
Replacement Value
Replacement Value is the Key!
• An owner executive could be an owner/family 
member and go play golf eve...
ALTERNATIVE CURRENCY
CONSIDERATIONS

Copyright © 2014. 
Alternative Currency Considerations
– What’s a Dollar of Base Salary Worth in Benefits, 
Time Off, Annual Incentive, Long‐...
Alternative Currency Considerations
– Numerous Studies of employees have found the 
most important  priorities employees w...
Alternative Currency Considerations
– Budget 1‐3% of Payroll per year
– Recognition Awards offer greater perceived value 
...
Questions and Contact Info
If you have any questions regarding this presentation, or any other 
compensation or corporate ...
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Turning Carrots Into Karats: Compensation That Retains and Motivates Top Talent

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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.

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Turning Carrots Into Karats: Compensation That Retains and Motivates Top Talent

  1. 1. Turning Carrots  into Karats Chris Crawford, President Longnecker & Associates Copyright © 2014. All Rights Reserved.
  2. 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. 3. BACKGROUND 3
  4. 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. 5. War for Talent 5
  6. 6. VARIABLE PAY
  7. 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. 8. Do Bonuses Work? Copyright © 2014. 
  9. 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. 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. 11. How Do You Select the Right Performance Metrics? Copyright © 2014. 
  12. 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. 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. 14. How Do You Set Goals and Payouts? Copyright © 2014. 
  15. 15. LONG-TERM INCENTIVES
  16. 16. Long-term IncentivesGolden Handcuffs • Vehicle, Value and Vesting • Eligibility • Liquidity Copyright © 2014. 
  17. 17. A WORD TO THE OWNER EXECUTIVE
  18. 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. 19. ALTERNATIVE CURRENCY CONSIDERATIONS Copyright © 2014. 
  20. 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. 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. 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. 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

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