Compensation Strategies of the Future to Support Continuous Value Creation

IRVINE, Calif. - Nov. 18, 2013 - PRLog -- Pay plans of the future must support a company’s perpetual need to create value that fuels growth, according to Ken Gibson, Senior Vice President at The VisionLink Advisory Group, a compensation consulting firm headquartered in Irvine, CA.  To do that, companies will need compensation strategies attractive to talent with entrepreneurial skills capable of driving innovation.

“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 said.  “And much of that focus is long-term, not short-term.”  The compensation firm leader will discuss these trends in a webinar on December 10^th entitled, “The Compensation of the Future: Where is Pay Headed?” Registration for the free broadcast can be accessed at: http://www.vladvisors.com/compensation-knowledge-center/webinars/e-119-the-compensation-of-the-future-where-is-pay-headed.aspx.

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 four 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 their need is to fuel innovation and creativity. At the same time, 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.  And the best people are looking for an entrepreneurial experience within the structure of an existing business. All this is happening while the public (the media) is focused on ‘fairness.’  So…this leaves everyone looking for effective solutions and asking where it’s all headed from here.”

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, according to the compensation firm leader.  Conversely, start-ups and other entrepreneurially-oriented companies need to be able to quickly obtain the “scale” that larger firms have already mastered. “The key, then, for most growth-oriented companies is to be able to attract those who would normally be inclined to start their own businesses to come inside a larger, existing organization and leverage the resources that exist there,” Gibson explained. “And how those people are paid will be a large factor in whether they are compelled by that opportunity.”

Gibson went on to say that this trend does not necessarily mean that the compensation tools of the past will 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 and continuously create value,” 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.”