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Cost Effective Compensation

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  • in partnership with Aspatore Books

    ExecBlueprints www.execblueprints.com

    Copyright 2012 Books24x7. All rights reserved. Reproduction in whole or part is prohibited without the prior written permission of the publisher. This ExecBlueprints document was published as part of a subscription based service. ExecBlueprints, a Referenceware collection from Books24x7, provides concise, easy to absorb, practical information to help organizations address pressing strategic issues. For more information about ExecBlueprints, please visit www.execblueprints.com.

    The HR VPs from Red Robin International, Menasha Corporation, and Covidien on:

    Cost-Effective Compensation: Orienting Salaries and Rewards

    Toward High-Performing Individuals

    Bill StreitbergerVice President, Human Resources, Red Robin International

    Rick FantiniVice President, Human Resources, Menasha Corporation

    Greg KayataVice President, Human Resources, Covidien

    Determining the right level of compensation for every position in your company generally requires more consideration than just follow-ing the benchmarking data for your industry and region. First, the authors of this ExecBlueprint recommend, you need to be aware of your companys financial situation and your shareholders profitability expecta-tions: you can only afford what you can afford. You also need to identify those positions that are most critical to your companys business strategy and goals, and be prepared to pay these roles more than prevailing market rates, especially if they have proven difficult to fill. (However, you may be able to pay other jobs less.) You should also observe your employees: Are they leaving the company owing to low compensation? What are they reporting on satisfaction surveys? Then, assess performance against goals. Would providing performance-based compensation (such as spot bonuses or merit raises) boost results? Finally, be prepared to repeat this process often. After all, norms and finances can change quickly, and your compensation strategy will need to stay in sync.

    Action Points

    I. In Setting Compensation Levels, What Challenges Do Companies Face?Unfortunately, the question of what to pay employees can be tricky and sensitive and the informed answer may not please everyone. In order to strike the right balance, HR will need to seek potentially conflicting guidance from three sources: shareholders profitability projections, the markets prevailing rates, and employees expectations.

    II. The Bottom LinePayroll may be a big expense but, ultimately, it should drive not drain your organizations profitability. Thats why HR and leadership need to continually review com-pensation practices to address the following: what do you need to pay top performers? Which incentives will drive growth? Maintain profitability for all products?

    III. Must-Have Practices for Evaluating Employee PerformanceYour organization only has so much money for merit increases, so how do you identify the most worthy recipi-ents? To effectively assess each employees contribution, managers should not only conduct an annual performance review, but also periodically sit down to talk about prog-ress with their people and stakeholders who know their work.

    IV. The Golden Rules for Determining Appropriate Compensation for All EmployeesWhile you might think that setting pay levels at the 50th percentile of the market will be a wise strategy, such a cookie-cutter approach may not ultimately serve your business goals. You should also consider: which positions are most valuable? Which take the longest to fill? Are employees leaving your company because of inadequate pay?

    V. Essential Take-AwaysIn general, high-performing organizations reward their top employees with more than a generous compensa-tion package. Strategies discussed here include cash bonuses, stock purchase plans, and rewards of stock equity. Finally, employees can also be motivated by non-financial factors, such as a company culture that gives them opportunities to succeed.

    Contents

    About the Authors . . . . . . . . . . . . . . . . . . . . . p.2

    Bill Streitberger . . . . . . . . . . . . . . . . . . . . . . . p.3

    Rick Fantini . . . . . . . . . . . . . . . . . . . . . . . . . . . p.6

    Greg Kayata . . . . . . . . . . . . . . . . . . . . . . . . . . . p.9

    Ideas to Build Upon & Action Points . . . p.11

  • Books24x7, 2012 About the Authors ExecBlueprints 2

    About the Authors

    Greg KayataVice President, Human Resources , Covidien

    Greg Kayata joined Covidien as vice president of human resources for the Vascular Thera-pies Global Business Unit in December 2006, bringing over 20 years of human resources leadership to the role.

    Before joining Covidien, Mr. Kayata had a variety of business partner and center-of-excellence roles in Invensys and General Dynamics.

    Mr. Kayata completed his bache-lor of arts degree in psychology from

    Providence College and his master of science in industrial relations from the University of New Haven.

    Rick J. Fantini is the vice president of human resources for Menasha Corporation, where he focuses on leadership development, succession planning, and compensation and recruit-ing strategies. Menasha Corporation is a leader in providing specialty packag-ing and solutions to a wide variety of industries.

    Before joining Menasha, Mr. Fantini spent 25 years in the paper industry, where he held a number of

    executive positions in business develop-ment, human resources, procurement, and, finally, served as vice president of operations. As VP of operations, he was responsible for customer service, distribution, manufacturing, and pro-curement. His scope of responsibility included approximately 2,200 employees and a budget of $650 million.

    Mr. Fantinis business development responsibilities required him to spend considerable time in Washington, D.C.,

    where he made numerous presentations to senators, members of the house, Con-gressional staff, and agency directors. He also had the opportunity to provide Congressional testimony on the subject of manufacturing job losses to offshore competitors.

    Rick FantiniVice President, Human Resources , Menasha Corporation

    In September 2008, Bill Streitberger joined the leadership team of Red Robin Gourmet Burgers, a 400-plus-unit public restaurant chain, to build staff capacity to deliver superior results. Mr. Streitberger is a business leader with expertise in managing organizational and human resources processes that drive bottom-line results. His areas of exper-tise focus on creating organizational

    capability and stability, developing high levels of employee commitment and loyalty, and achieving results from share-holders, team members, and guests.

    As vice president of human resources, Mr. Streitberger oversees the day-to-day functions for all HR areas, and is organizing key strategies and proce-dures to build the foundation for the entire human resources function. He

    has implemented and refined systems and administrative procedures through-out the company with an emphasis on benefits, compensation, recruiting, and employee relations.

    Bill StreitbergerVice President, Human Resources , Red Robin International

    Read Gregs insights on Page 9

    Read Ricks insights on Page 6

    Read Bills insights on Page 3

  • Books24x7, 2012 Bill Streitberger ExecBlueprints 3

    Bill StreitbergerVice President, Human Resources , Red Robin International

    Establishing Pay ScalesWe subscribe to several different compensation surveys, which we use to review total compensation not just salary in our markets. We consider the ranges for differ-ent jobs from the low to the high end and the factors that define the different levels of compensation in our competitors scales. These lev-els usually include cash, long-term incentives, benefits, and so forth.

    We always compare ourselves to our competitors and major mar-kets. We also review our exit inter-views to determine if people are leaving us because of compensa-tion. Fortunately, we find that com-pensation is not the driving factor for leaving our company; usually it is more about individuals looking for a change. This helps us confirm that our pay rates are competitive.

    We also look at the Chain Res-taurant Compensation Association (CRCA), which is a national com-pensation benchmarking organi-zation. Because our home office is based in Denver (and we are drawing from the Denver market), we then review a local group and compare our talent here against accounting, IT, and marketing in other local companies.

    As for how our compensation packages are structured, on the cash side we have base starts and, depending on the level of opera-tions, we offer quarterly bonuses

    and an annual bonus for the rest of the organization. We have long-term incentives, which are a combi-nation of cash performance plans, stock options, and restricted stock units. Our benefits plan includes vacation time, medical insurance, and stock purchase plans for our team members, to which they can contribute via payroll deduc-tions. Twice a year, depending on the amount they have in their

    account, we will buy stock at a discount. Because we want peo-ple to be familiar with what our restaurants are serving, we have discount plans for meals at the res-taurants. Finally, we have a retire-ment program available and we match contributions.

    Rewarding High-Performing EmployeesWhile there are many different components to our compensation scales, of course we look at the basic norms in terms of salaries to determine if we are considered competitive for each job and expe-rience level. For our bonus plans, we review measurements such as performance goals against enter-prise goals. The

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