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Keys to a Successful Partnership with Finance

Keys to a Successful Partnership with Finance

To be successful in any job or sport, there is always a key partnership that is critical and most important.  In baseball, it’s the pitcher and catcher. In American football, it is the quarterback and center.  In Compensation, the relationship and partnership with Finance is essential.  In all three examples, each individual and organization has to be in sync with the other to avoid fumbles, passed balls, and missed opportunities.

For over 30 years I have had the pleasure of working with some fantastic Finance partners. When thinking about what made the partnerships great, four (4) common themes were always there.

There Was Trust

In every situation, we knew we each had the best of intentions and that we would have “each other’s back”.  We would make sure no one was surprised and that we were both prepared and showed-up well to meetings especially with senior leadership.

Tough Conversations Were Held Behind Closed Doors

As in any partnership, both parties want the best outcome.  To do this, it is essential to have tough conversations in a way that is safe.  Only by having those open and honest conversations can you understand each other’s perspective and get to the best answer.  As in any good personal relationship, it’s best to have those conversations behind closed doors so both parties feel safe and secure.

We Agreed to Disagree

We always desired to be aligned in the recommendation; however, that didn’t always happen.  In those times, we agreed to disagree. We believed everyone had valid points and the best answer was a matter of perspective or desired outcome. Fortunately, this did not happen often but when it did, we took all of the information to senior management and presented both sides equally sharing our perspectives.  This approach allowed each of us to be heard and management to make an informed decision.

We Validated the Math & Models

A good portion of what a compensation professional does involves math and models. And, when designing programs for large groups of employees, the numbers start getting pretty big and can impact the bottom-line.  Don’t keep your models secret and instead share your models with Finance and have them validate your methodology, assumptions, and results. When meeting with the CFO, CEO or the Compensation Committee, it is great to have everyone giving a thumbs up on the analysis and results.

To win a baseball or football game takes time and practice.  Building a great partnership also takes time and you have to be intentional about it.  Reach out and get to the know your partner personally as well as professionally.  Not only will the partnership be great and help both of you be successful, you might just find that you made a really good friend as well.

To read other blogs, go here: https://www.alliancecompensation.com/blog/

To see our Linked-In company page, go here: https://www.linkedin.com/company/alliance-compensation-llc/about/


David Adent is a Managing Partner with Alliance Compensation LLC, a team of seasoned experts and trusted solution for clients across the Western US in public and private companies. He has over 30 years of experience in corporate and executive compensation roles, and lives with his wife in Spokane, WA.

To be successful in any job or sport, there is always a key partnership that is critical and most important. In Compensation, the relationship and partnership with Finance is essential.

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Best Laid (Delayed?) Plans

Best Laid (Delayed?) Plans

You are a well-respected, knowledgeable, and smart compensation/rewards professional, with a lot of success behind you.  You’ve just put together one of the best pieces of work that is sure to be a “game-changer” (to use an over-worked phrase) for your company.  You have the time booked with the CEO.  And you walk out rejected and dejected.

I’ve worked for a lot of great companies over my career – Portland, Phoenix, Bay Area — but not always for people that had the greatest insight into rewards and compensation.  Sometimes that’s the HR leader, but more frequently it’s the CEO, or as I affectionately call him/her, the Chief Compensation Officer (CCO).  That means instead of meaningful answers on key questions and great ideas, you get responses like:

  • Gobble-de-gook:            “We need incentive programs that will enable us to save on expenses, not pay outsiders.” (Huh?)
  • Ostrich:                            “I don’t hear a whole lot of negative feedback, things must be working.”
  • Black or White:               “Turnover isn’t a problem so compensation must be OK.”
  • 4th and long (punt):        “The Executive Committee needs to decide on our funding priorities.”

Or here’s where you really know things are going sideways: “This would look better it the line was green instead of yellow.” (Play sound of your hair ripping out.)

Thus the subject of this blog post.  I’ve just experienced something like that again, but this time indirectly as a potential client in Seattle was unable to move ahead because the CEO didn’t want to make the changes to the compensation plan… that he had designed… and gave him the ability to change all the decisions made by managers…

So Now What?

As an external consultant, you can say “OK then,” and move on to the next opportunity.  But what if you are working for the CCO?  There are still things you can do that continue to advance great ideas and strategies.  Here are some specific steps you can still take that while not optimal for your original compensation plans could at least help to prepare for a time when you get the go-ahead to move forward.

  1. For incentive and equity plans, review your plan documents.  Look at those specific areas where you’ve observed some friction or perhaps where errors exist.  For example, does your commission plan describe credit splits as 50/50 while Sales Operations is paying 100/100?  Do you have new pay grades eligible for the company bonus plan, but haven’t updated the appendix where eligible grades are listed?  Go after those areas that may only affect a small portion of your population but could cause a big headache when challenged.  Use data to prove the need – best reply to a Black or White or an Ostrich.
  2. Spend some quality time with finance.  It’s fine to try to engage with finance on the fly during a design project, but so much easier to have already established roles and responsibilities, and in some cases, educating on design principles and such when there’s no pressure or deadlines involved.  And when you have a finance ally with you next time with the CCO it could be a different result.
  3. Invest some time in looking at all your labor cost data, not just the incentive or bonus element.  Most CFO’s are willing to discuss if the company pays out cash in fixed or variable form, but they really care about the total going out the door.  When you look at things like employee distributions in grades, management spans and the like, you start to uncover elements of total labor costs that may help fund future variable pay programs for the broader workforce or add a penny or two to EPS.  Taking the CCO additional business metrics they may never have seen before could jump start a decision.
  4. Poke at your administrative processes and payment mechanism.  If you’re lucky you have this well in hand, but most of us have opportunity here either to re-ask why we do things a certain way, whether we are compliant with our own pay policies, and if plan payouts are being calculated and paid correctly.  For example, if your sales incentive plan is supposed to pay incentives against a year-to-date quota, is that really happening, or is there a spreadsheet error somewhere paying every month independently? Nothing derails a CCO conversation faster than sending you to the woodshed for poor execution of a current program.
  5. Test different approaches and ideas.  Sometimes the best socialization approach with a CCO is a slow drip of the concepts rather than quick change.  This works especially well when you can run your idea in parallel to the current plan and show any differences.  One of the best approaches to slow decision makers in my experience.
  6. To take #5 a little further, ask to run a pilot.  That may not be something you are used to doing, but why not gather the experience in real time before taking something live for everyone?  It may even create a little “buzz” in the rest of the work force.  This happened to me once with a large hi-tech company in Santa Clara. Executive support existed for a change in our employee recognition program globally, but IT and HR leaders couldn’t figure out how to support it.  A brave HR leader of a large organization volunteered to run a pilot in part because she saw the opportunity to make significant inroads for employee engagement and greater simplification of existing programs.  It was a tremendous success and we had other organizations clamoring to get in, creating the “pull” needed to overcome the barriers.  And it proved to the CCO that it was not just some hair-brained idea.

Always Remember…

I have an axiom I’ve followed for many years in compensation and the business world in general.  You may have seen this written in different ways, but it basically goes like this:

“There is nothing more difficult to take in hand, more perilous to conduct, than to take the lead in the introduction of things, because the innovation has for enemies all those who have done well under the old conditions and lukewarm defenders in those who may do well under the new.”

Remember, it probably isn’t personal – so once you get past the surprise, find a productive way to move ahead.

———————————-

Jim Harvey is a Managing Partner with Alliance Compensation LLC (www.alliancecompensation.com) , a team of seasoned experts and trusted solution for clients across the Western US in public and private companies. He has over 35 years of experience in corporate leadership roles and consulting, and lives with his wife and three dogs in Sherwood, OR.

You are a well-respected, knowledgeable, and smart compensation/rewards professional, with a lot of success behind you.  You’ve just put together one of the best pieces of work that is sure to be a “game-changer” (to use an over-worked phrase) for your company.  You have the time booked with the CEO.  And you walk out rejected […]

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Increase Your Impact, When to Hire an Expert

Increase Your Impact, When to Hire an Expert

If you are like me, you like to do things yourself.  I generally know how long things will take and I like the satisfaction of saying “I did it”.  But there are times when I pause and ask myself does it make sense for me to do this.

For me personally, I really dislike plumbing and I’m not good at it. No matter what I do I seem to struggle to squeeze into those little spaces and feel like I am going to break my arm. And, there always seems to be a leak when I’m done. So, even though I don’t like to spend the money on plumbing, for me an expert is always the way to go!

In a professional setting, there are a number of reasons where it makes sense to go with an expert including:

  1. You do not have someone on your team with the knowledge or experience,
  2. When you are dealing with issues that impact a very sensitive employee group or a lot of employees where it is critical to get it right,
  3. When you need or have to improve credibility with stakeholders including management or employees,
  4. There are special laws that need to be considered and you just don’t deal with them on a regular basis, and of course
  5. Your team is already at or beyond capacity and you just could use the extra hands.

When thinking about executive compensation, it makes sense to get help from an expert when hiring executive officers.  There are a lot of factors to consider in this situation including internal equity, employee perceptions for publicly disclosed compensation information, the Compensation Committee, the Board of Directors, and how your investors and shareholder advisory groups will view the situation.  Making a mistake here can create headaches for you when it comes time to seek shareholder approval of your executive compensation practices or proposals.

If and when you do decide to hire an expert, remember, their help can take many forms.

Complete Creation

In this situation the experts will create the design, or fine tune yours, and then create everything that supports rolling out the design including presentations, communications, and plan documents. This approach is great when you do not have the expertise OR bandwidth for the project.

Co-Author Work In Partnership

This is a great idea when you want to be involved in the work while getting expert help. Your company can learn a lot using this approach.  Remember, this also creates a situation where you are partners and have an equal stake in the results. I was fortunate to partner and co-present with Jeremy Erickson of Pillsbury Winthrop Shaw Pittman LLP and Jon Burg of Infinite Equity on the impact of the CEO Pay Ratio requirements at a Global Equity Organization conference. Partnering with Jeremy and Jon provided the opportunity to gain expertise and directly apply it in a business setting.

Plan/Content Review

External viewpoints can be very helpful when making sure your proposed designs, plans, programs and/or content are designed and communicated well. External advisors typically look at things differently since they have exposure to multiple companies and designs. You will most likely appreciate their insights and suggested improvements. And, it provides you the ability to say an expert agrees with your approach.

Doing projects yourself is very satisfying; however, there are times when hiring an expert is the right choice especially when you use a model that works well for you and your company.  Each project and situation is different; trust your judgement on when to “jump in the pool” and hire someone.  For me, hiring a plumber is always the right thing to do!

To read other blogs, go here: https://www.alliancecompensation.com/blog/

To see our Linked-In company page, go here: https://www.linkedin.com/company/alliance-compensation-llc/about/


David Adent is a Managing Partner with Alliance Compensation LLC, a team of seasoned experts and trusted solution for clients across the Western US in public and private companies. He has over 30 years of experience in corporate and executive compensation roles, and lives with his wife in Spokane, WA.

Doing projects yourself is very satisfying; however, there are times when hiring an expert is the right choice especially when you use a model that works well for you and your company.

Read More
 
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