WorldatWork has expanded its focus in recent years to include “total-reward” issues such as healthcare, financial wellness and work/family as part of its overall mix. But as anyone who’s attended the association’s annual conference lately knows, no one can ever accuse the Scottsdale, Ariz.-based association of abandoning its roots in compensation. (Some of you will no doubt remember the days when WorldatWork was named the American Compensation Association — and pretty much exclusively focused its attention on comp.)
Certainly, those roots were evident this week at WorldatWork’s Total Rewards 2014 Conference & Exposition at the Gaylord Resort in Dallas, which attracted around 1,500 attendees.
Comp-specific sessions at this year’s event ranged from the tactical “Compensation as a Career” to the more strategic “Executive Rewards Trends and Predictions,” which I tried to attend but was turned away from at the door because, I was told, every seat had been taken.
I was able find a seat at an earlier session on Monday titled “The Danger of One-Size-Fits-All Executive Compensation,” which included as presenters Steve Harris, managing director of Frederic W. Cook & Co., and Brynn Evanson, executive vice president of HR at J.C. Penney. (Evanson previously headed comp, benefits and talent operations at JCP and replaced Dan Walker as its top HR leader in April 2013. Some of you may remember Walker earned a whopping $20 million during his first and only year as JCP’s top HR executive and departed soon after Ron Johnson was ousted as CEO in early 2013)
I was especially interested to hear how JCP was tackling executive comp these days, considering all its been through. (In what has to be described as perfect timing, JCP reported its first decent quarter in quite some time last week, suggesting that its turnaround might have entered a new phase.)
Harris suggested that employers would be making a mistake were they to let the forces at work today, such as increased government oversight and the efforts of proxy advisory firms, significantly influence what they do — and, more importantly, don’t do. Considering no two companies have the same challenges and business objectives, he said, there’s a real danger of “falling into the trap” of “sameness” when it comes to exec comp.
Of course, he said, it’s not all bad to be formulaic, but it’s also not all good.
When you look at the pay-mix charts today, Harris said, you don’t see a whole lot of difference between your company and the median company.
True, he said, being somewhere in the middle goes a long way toward preventing scrutiny, but that doesn’t mean it’s the best approach.
Harris stressed the downside of formulaic incentive plans that emphasize pre-established goals and downplay comp-committee discretion and judgment in determining payouts. Following a herd mentality, he said, can often stifle innovation and undermine an organization’s ability to achieve its business’ objectives.
Instead, Harris said, employers need to be able to balance shareholder support for performance against proxy-adviser angst, use good business judgment and “manage the influence of peer comparisons.”
As Evanson made clear in her remarks, as far as executive comp is concerned, flexibility has been an important factor in JCP’s turnaround efforts.
As most of you are aware, JCP has seriously underperformed against its peers in recent years, with its stock price going from $36 in 2011 to around $8 today. During that period, the Plano, Texas-based retailer went from being a coupon- and discount-based retailer in 2011, with Mike Ullman at the helm; to a lowest-price retailer in 2012, with Ron Johnson in charge; back to being a coupon- and discount-based retailer in 2013 and 2014, again with Mike Ullman leading the firm.
Each phase required a very different strategy, Evanson told attendees.
As part of JCP’s turnaround efforts, Evanson said, JCP has recently been using spot awards for top talent, promotions, and learning and development to hold onto key talent.
(Before moving on, I probably should mention a story in the Dallas Morning News that reported all of “the hiring and firing in 2011 and 2012 cost Penney $236 million in bonuses, stock awards, transition and termination pay: $171 million for officers and $65 million for other corporate executives.”)
I also had a chance to speak on Monday with Mercer Senior Partner Steven Gross and Partner Mary Ann Sardone prior to their session titled “Learnings from Managing Global Talent, Compensation and Benefits.”
On the global-comp front, Gross said, employers are focused on “segmentation” and “figuring out how money gets allocated, especially for many of the more critical positions.”
Recognizing critical workforce segments is a core component of a successful total-rewards strategy, Gross said.
He also said it’s no coincidence that the expo hall at WorldatWork has so many rewards-and-recognition vendors exhibiting, since compensation budgets aren’t expanding and companies are looking for other cost-effective ways to acknowledge the efforts of employees. (Achievers, BI Worldwide, Globoforce, O.C. Tanner, MTM and Michael C. Fina were among the dozens of exhibitors at the show in this space.)
In an effort to successfully align comp with business and talent strategies, Sardone said, she’s seeing more and more companies attempting to create “an eco system” across their organizations, where comp and talent management are more regularly talking to each other.
Mercer released this week its Total Rewards Survey, which suggested that companies still have a lot more work to do when it comes to aligning comp to business priorities. While more than half (56 percent) of organizations surveyed said they made a significant change to their total-rewards strategy in the past three years, less than one-third (32 percent) said their total rewards and business strategies were fully aligned.
It is critical that the rewards strategies of companies align with their business strategies to achieve overall success, Gross said.
On Tuesday, I also sat in on a session titled “An Insider’s Guide to Compensation Committee Meetings,” during which a panel of experts shared a few common-sense best practices HR and comp leaders might want to keep in mind as they work with their comp committees.
Robin Colman, vice president of compensation, benefits and HR operations at eBay, pointed out that it’s important for the comp person to know the preferences, biases and points of view of the people in the room and adjust his or her approach accordingly. Often, she said, that includes knowing what committee members might be seeing and hearing at other boards they may be sitting on.
John England, managing partner at Pay Governance LLC, a consulting firm that works with comp committees, advised those working with their comp committees not to be “another personality” in the room, since there are enough “personalities” in the room already.
If you have something to share, he advised, make sure no one is ever surprised.