Certain functions in your business are more important than others. And much like these functions, some people on your executive team are more important than others. Their compensation should, therefore, reflect the value of their work and how their work can fuel growth for your business.
That may sound like common sense but based on Chief Executive’s annual CEO and Senior Executive Compensation research, far too many companies prioritize “fairness” and average out executive compensation across their entire team. The data, indeed, shows that while CEOs and presidents lead the C-Suite as far as compensation goes, remuneration remains fairly similar across most senior executive titles.
Yet, in pursuit of “fairness,” many companies lose the ability to pay and retain the key superstars that they need to fuel growth.
Instead, our research has found that the best strategy is a mix of talent levels and compensation across the team, one that pays more for what’s more valuable. A superstar top-quartile executive (paid a superstar top quartile executive salary) is not going to be warranted or affordable for most companies. Smart companies will differentiate having a great vs. a good person in certain functions—and will pay them accordingly.
No fixed rule applies across the board—every company needs their own formula. For instance, if you run a mature private equity-backed manufacturing company that’s growing at a decent rate with strong cash flow, your CFO may be one of your most important executives. The CFO has to deal with bank covenants, make sure they don’t trigger any of the loan covenants and work on cost control initiatives. The significance of that role should warrant a “superstar” CFO and commensurate top quartile compensation.
Compare the mature manufacturing company to an early-stage biotech company, where the head of research and development may be one of the most critical positions to have a superstar vs a good or a very good performer. Your VP of sales and marketing in this early stage or pre-revenue company? Maybe not as important.
There’s no perfect science for this talent-compensation formula, but it will take some focus. You’ll need to consider:
Once you do that, you can figure out who on your team should be given a superstar salary and who just needs to be a good performer. Once you get there, you can better understand how you should divvy up the executive compensation pie by further benchmarking what rivals are willing to pay. This can also lead to potential opportunities to recruit superstar executives to fill specific needs.
For additional information and in-depth benchmarks by sector, size, ownership type, growth rate, region and profitability, Chief Executive’s 2020-21 CEO & Senior Executive Compensation Report for Private Companies offers more than 140,000 data points collected from 1,780 companies in April through July of 2020 about their 2019 fiscal year compensation levels and practices, as well as their current and expected compensation levels for senior executives for the remainder of 2020. This kind of data can go a long way in helping you better figure out where you stand and make the right moves in doling out executive compensation.
Chief Executive Group exists to improve the performance of U.S. CEOs, senior executives and public-company directors, helping you grow your companies, build your communities and strengthen society. Learn more at chiefexecutivegroup.com.
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1:00 - 5:00 pm
Over 70% of Executives Surveyed Agree: Many Strategic Planning Efforts Lack Systematic Approach Tips for Enhancing Your Strategic Planning Process
Executives expressed frustration with their current strategic planning process. Issues include:
Steve Rutan and Denise Harrison have put together an afternoon workshop that will provide the tools you need to address these concerns. They have worked with hundreds of executives to develop a systematic approach that will enable your team to make better decisions during strategic planning. Steve and Denise will walk you through exercises for prioritizing your lists and steps that will reset and reinvigorate your process. This will be a hands-on workshop that will enable you to think about your business as you use the tools that are being presented. If you are ready for a Strategic Planning tune-up, select this workshop in your registration form. The additional fee of $695 will be added to your total.
2:00 - 5:00 pm
Female leaders face the same issues all leaders do, but they often face additional challenges too. In this peer session, we will facilitate a discussion of best practices and how to overcome common barriers to help women leaders be more effective within and outside their organizations.
Limited space available.
10:30 - 5:00 pm
General’s Retreat at Hermitage Golf Course
Sponsored by UBS
General’s Retreat, built in 1986 with architect Gary Roger Baird, has been voted the “Best Golf Course in Nashville” and is a “must play” when visiting the Nashville, Tennessee area. With the beautiful setting along the Cumberland River, golfers of all capabilities will thoroughly enjoy the golf, scenery and hospitality.
The golf outing fee includes transportation to and from the hotel, greens/cart fees, use of practice facilities, and boxed lunch. The bus will leave the hotel at 10:30 am for a noon shotgun start and return to the hotel after the cocktail reception following the completion of the round.
