Executive Compensation

Today I was given the question of “Is executive compensation excessive or appropriate ?”. Prior to watching the PBS segment, I would have said that the executive compensation is appropriate because higher pay is correlated to high performance. Although I still think this is true, I do also think that the pay gap is a bit excessive. CEO’s are making not just a an extra $50,000 more a year than your average worker but sometimes millions more.

Being able to pay your executives more will not only motivate them to continue working in a highly stressful leadership role but can allow other employees to have a higher level of respect for the work their executives do. This being said, I believe slightly above-average compensation would be appropriate for executives.

Overall, there are three main components of compensation There is core compensation which focuses on base pay and bonuses/short-term incentives. Core compensation has been proven to make up only a small percentage of an employee’s compensation. In addition, deferred compensation is a long-term incentive and includes separation agreements. Deferred compensation is most helpful to promote the recruitment and retention of executives. The last component of compensation is benefits that offer protection programs and perks. This allows key employees to use company property for personal use, however is only useful when it used to benefit the company.

Among the three components of compensation, I think deferred compensation is most essential for recruiting key employees that will be motivated to lead the company toward a competitive advantage. Deferred compensation allows for the key employees to have part ownership or stock options that can align their interests with their shareholders. Furthermore. separation agreements are another big reason for motivating key employees to lead the company toward a competitive advantage. These are great for after retiring from a company because executives will continue to receive compensation. When executives have ownership of their companies stock and can ensure that they have the company’s best interest at heart. At this point, the company’s gains and losses become the executive’s gains and losses.

Recruiting executives/ key employees can be a really big decision for a company to make because of their leadership role. Make sure to attract the right kind of executive that will have the company’s success in their best interest can be challenging. Using deferred compensation should be helpful when attracting a potential key employee candidate.

What Discretionary Benefits to Eliminate first for Budgeting?

What are discretionary benefits? According to Career Minds, discretionary benefits are employee benefits that are not mandated by law. A lot of benefits are a companies competitive advantage to stand out and be chosen over companies that don’t offer a good benefits package. Some discretionary benefits that are not mandated by but are a nice perk are the following: Paid Time Off, Sick time, Health/Medical Leave, Medical Insurance, Life Insurance, Dental Insurance, Retirement match for 401(k)s, Flexible Spending Accounts, Health Saving Accounts, Paid Holidays, Education Assistance.

Mentioned above are only some discretionary benefits that employers voluntarily offer to their employees. If the HR department of my company were ever asked to eliminate some over our discretionary benefits to meet budget, then their would be a lot of hard decisions made. When deciding which benefits to keep, the company has to ensure that they are still maintaining a competition advantage while maintaining their budget

Out of the list I mentioned above, I would suggest the HR department only keeping five of them. To begin, Medical Leave is highly suggested to keep because it protects employees from keeping their job while they are away. In addition, offering a retirement program to employees is a good way to motivate them to stay long-term. Similarly, offering vision, dental, and life insurance are highly recommended to offer not only competition but to retain employees as well. PTO is a nice perk to have if the budget allows it however could be left behind. In addition, I would consider eliminating Paid Holidays, Education Assistance, Health Savings Account, Flexible Spending Accounts, and Sick time to save on costs.


What Pay Structure works Best?

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When searching for the perfect company to review and decide what pay the structure would work best; either person-focused pay or job-based pay, I thought Google would be an interesting choice.

I say this because I think in some circumstances, I think some of the jobs could be one or the other. I think this because some of the lower foundational, entry-level job positions at Google would work best using job-based pay. Lower entry-level positions don’t require a whole lot of skill and could easily be replaced the next day if needed. People that are typically on the foundational level of the company demonstrate high levels of job performance and lower levels of skill.

 On a different note, one of the lead software engineers is one of the top reasons why Google is profitable and is continually creating new ideas for the company, then that could potentially demonstrate a person-focused pay structure. This style of pay structure can be
really helpful in paying those higher-skilled employees that are extremely valuable to the company. These kinds of employees in a company like Google typically have a lot of creative freedom, which is where having a person-focused pay structure can be really helpful in determining the amount the company wants to compensate the employee for their work. In this scenario, skill-based pay and pay-for-knowledge could be how they demonstrate competency.

Throughout the text, it highlights the U.S. Department of Labor Competency Model, which is extremely helpful in identifying areas that could use either person-focused pay or job-based pay. At the top tiers in “Occupation Related”, where Google would begin to utilize the person-focused pay for all of the software engineers and marketing managers because they are able to have more creative freedom. Those that have more creative freedom, the less likely the job is to align with a specific job description, which is where person-focused pay would be favored over job-based pay

Influenced by Compensation?

When working in the workforce, I have seen myself to be easily influenced by compensation. About a year ago I was working for a company that I was being under-compensated for. I was doing so much important work and wasn’t being compensated for it. When I began to feel underappreciated/underpaid, I quickly found myself searching for a new job. After I started looking for a new job, I noticed I became less present at work and felt less motivated to work as hard as I did. After a few weeks had past I found a job that not only paid more but offered better incentives which resulted in me leaving my other job.

After some time passed with my new job, I realized the incentives had a big influence on my motivation to want to work hard because I felt more appreciated for my work. Ultimately, if you feel like what you are doing is important and is appreciated by the company than you will become loyal to them. Therefore, being a company with a good compensation strategy is extremely advantages to retaining their employees. Without it, the company will begin to see employees disengaged and not feeling important like I was before I left.