Compensation & Benefits Review

Nearly every major corporation today seems preoccupied with developing new-economy businesses and processes that will create sustainable competitive advantage, but many of their dot.corp organizations are struggling to succeed. Too often, they have overpromised substantial additional value to the parent and underdelivered on the commitment. Many of them have received special treatment from the parent, which has angered the mainstream organization. The weakness to date has rarely been due to failures of business strategy or technology. Many dot.corp organizations struggle because their people strategies attract the wrong people, motivate the wrong behaviors and focus to a fault on minimizing collateral damage back at the mainstream organization. A one-size-fits-all approach does not work when it comes to dot.corp reward strategy. The two key steps are to categorize the dot.corp’s organizational structure and then to identify the parent’s planned exit strategy for the entity. Once human resources has answered these two questions, it can develop a powerful new reward strategy that maximizes the dot.corp’s chances of success. Successful programs acknowledge that the dot.corp labor market is somewhat different from the dot.com labor market especially at the executive level. They also need to avoid becoming overly focused on minimizing collateral damage in the mainstream organization. For a dot.corp organization to attract outstanding talent and fulfill its mission of transforming the parent, it must break new ground in its reward strategy notwithstanding the reactions back at the mother ship.

A new and emerging human resources related use for the Web and the Internet is in managing incentive compensation plans, a use that has almost tripled over the past year. The three things driving this increased usage are the desire to reduce costs, the need for improved communicationand the opportunity for greater interactivity.A survey of compensation professionals showsthat just using the Web does not by itself lead tobetter communications; there are a wide range ofother factors to consider in improving communications.The article ends with an example of howthe Web and the Internet can be used to promoteinteractive communications for building a communityof interest and improving workgroupproductivity.

Recently, some compensation and benefits experts have been witnessing a renewed interest in good old-fashioned base pay as an important part of a pay mix that includes base, bonus and options. The trend is clear among executives in high-tech companies in general and high-tech start-ups in particular. The change in the compensation mix in the high-tech sector is so subtle that it has gone unnoticed by many. The implications of the change, however, are not so subtle. This article addresses the implications for entrepreneurs who invested in high-tech start-ups for quick profits from IPOs, technology stock shareholders, compensation professionals charged with developing pay plans that promote technology companies’ business objectives, and employees who hold stock options.

A new profit-center approach for sales force compensation allows firms to replace quotas with an innovative commission structure that ties compensation to corporate expenses and desired profitability. Sales representatives contribute their share of corporate expenses and profit, after which they can keep most of the money they bring into the company. In addition, sales associates choose their compensation plan and decide how to contribute to the company’s expenses. With thismethod, firms can more effectively motivate sales representatives, strengthen recruiting, increase market share and ensure that the business meets profitability goals. This article explains the strategy in more detail, including the most effective way to allocate corporate expenses among sales associates, how a predefined level of profitability can be built in and the appropriate way to determine the correct placement of commission levels. The technology necessary to implement this strategy is also discussed.

The purpose of a stock compensation program is, typically, to create an incentive for executives to focus on improving stock price as well as to increase stock ownership. Unfortunately, companies have found that compensation is often delivered without an increase in actual share ownership. As a result, guidelines for appropriate levels of executive stock ownership have become popular as a way to force or encourage executives to retain shares from stock compensation programs. Although there are a number of arguments for and against these programs, many of the flaws and criticisms can be addressed through design and administration. This article provides a detailed look at stock ownership program design, including the types of guidelines that can be implemented, how shares can be counted toward meeting goals and approaches to compliance and monitoring. It also discusses other methods of encouraging and forcing ownership.

This guide represents the first in a series of CBR guides designed to inform readers about the variety of new compensation and benefits software and Internet-based resources available today. For each product or resource listed, the guide provides detailed information on the product and pricing, plus full contact information.