The fine line between executive talent management and growing business revenue is becoming more readily apparent to corporate leaders and board members. As companies continue to develop innovative compensation programs, most decision-makers are seeking to fine-tune succession planning and workforce analytics.
Managing executives may be cumbersome for some companies, but new data point to boards taking on more of this responsibility. Year-over-year, board oversight has increased in the following areas: succession planning (69%), executive candidate evaluation (69%), leadership development (40%) and workforce metrics (33%), according to Mercers annual Executive Rewards Survey.
Boards are really recognizing the role that they play in terms of really balancing between the risk of managing talent and using talent as a driver of business, David Cross, a partner at Mercer, tells EBN.
Succession planning oversight saw the highest increase since 2013, the survey says. More than 200 North American companies representing over 20 industry sectors responded to the survey. Half of companies in the sample have annual revenues in the excess of $1 billion and 10% reported annual revenue in the excess of $10 billion.
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Cross highlights that company boards heightened awareness of leadership development shouldnt hinder executive recruitment or company direction.
Its not an increase in red tape, says Cross. Boards dont typically get involved with that process [executive recruitment], notwithstanding for CEOs of course, but its more around the structure and [whether] the questions being asked are the right questions. [Boards have] a much more diverse view than management could have. Managements focus is appropriately more narrow, [so] its not about cumbersome process but really [about] ensuring that rigor is attached to the process.
A typical executive rewards program centered around salary, an annual bonus and long-term equity compensation is the norm nowadays, according to Cross. Also on the rise is added scrutiny from shareholder proxy advisory firms that look to dictate executive compensation.
Its not to say that these other programs [such as deferred compensation] are not reasonable programs, its that companies are recognizing that we want to make sure that the returns that we get from that executive rewards expense is most impactful, says Cross.
Bob Damon, executive chairman of the Americas for Korn Ferry, a leadership and talent consulting firm that assists businesses with executive recruitment, believes that boards need to consider other aspects of company growth when determining true returns.
All the research shows that money does not provide job satisfaction, Damon tells EBN. All that money does is keep people from being dissatisfied. Sometimes the obvious assumption on the boards of large companies is that competitive compensation is the cure all for retention. This can be a misguided assumption.
Simply analyzing short-term performance metrics of top executives only tells part of the story, he maintains.
Are those really the metrics that will also provide a company with long-term health as it relates to employees? asks Damon. I would argue that the most effective boards I have seen are ones focused on employee engagement and inspiration, which must be built into the companys culture.
