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Pay Strategies of the Future to Adopt Entrepreneurial Approach
Compensation of the future will incorporate entrepreneurial attributes that can attract the innovative talent companies will need to fuel growth. This creates a focus on innovation and the need to create pay strategies that will reward it.
“The trends are moving toward more and more key producers receiving a larger percentage of their pay in the form of ‘value –sharing’ arrangements,”
Gibson explained that compensation is such an important issue because it represents the largest budget item most business leaders have to manage. And recent trends show American companies are paying attention to this issue probably more than they ever have before.
“Why is that? Well…much of it has to do with the economic environment of the past three plus years that has fundamentally altered the way business leaders, employees and potential employees and the public (through the eyes of the media) look at financial rewards within the business,” Gibson offered. “Owners and CEOs are worried about locking key producers into high salaried positions when they need to fuel innovation and creativity. Talent that has been sitting on the sidelines is concerned about coming back into the labor force and getting locked into a salary that is far below what it earned at its peak. The best people are looking for an entrepreneurial experience within the structure of an existing business. And the public (the media) is concerned about ‘fairness.’
Much has been written in business literature recently about how large companies need to create a more nimble environment for innovation and nurture a culture of entrepreneurism within that structure. Conversely, start-ups and other entrepreneurially-
Gibson went on to say that this trend does not necessarily mean that the compensation tools of the past will necessarily be replaced—although some of that might occur. Rather, it’s a matter of looking at compensation strategies more innovatively and comprehensively, just as a business does with product development, marketing and other engines of growth. Where a generous salary and an annual bonus were deemed adequate in the past, the future will require value sharing on a much broader scale. Profit pools, equity sharing, stock options, phantom stock, performance unit plans and even internal venture capital awards must all be weighed and considered as part of a strategic and future-centered approach to compensation development.
“In short, there is a wide open field of opportunity for businesses to grow,” Gibson summarized. “And attracting the right people will be the primary key to that growth. As a result, compensation has to be thought of differently than it ever has before.”