Senior executive performance measures do not yet value EB

Just how important is the Employer Brand to FTSE 250 CEOs?The answer seems to be ‘Not much’ on the basis of how they are rewarded.

Last week, I saw a presentation by the leading remuneration adviser Kepler Associates who work with 50 of the FTSE 250 Remuneration Committees. They revealed some excellent thought provoking recent research they had conducted amongst REMCOs and one aspect prompts me to write this blog.

This was the blend of financial and non financial measures used in these companies annual bonus plans to demonstrate the usage of short term incentive measures. Financial measures led with Profit/EPS followed by Cashflow, Revenue, Returns, EP, Total Shareholder ReturnandNet Asset Value. 

How did people related dimensions fare in The Non Financial measures which typically had a weighting of 20-30% of the total?  In descending order of usage(based on the % of short-term incentive schemesoperating across the FTSE250) the table listed-

-          ‘Personal Objectives’36%comprising areas like controllable costs, maintenance of capital disciplines, enhancing value via M&A

-          Health and Safety measures12%

-          Operational Measures 9%

-          Customer satisfaction 7%

-          Staff satisfaction – bottom of the list with 4%

So much for ‘People are our most important asset’ type statements! When I questioned thispretty abysmal figure (which is made worse if one considers the effect of the weighting towards financial measures), the answer from the consultants and the audience of Non Executive Directors was the difficulty of objectively measuring performance.Attracting, retaining and motivating talent is becoming even more of a critical issue for companies. However, the challenge remains on how to effectively combine key performance indicators in bonus plans that are measureable, understood by participants and acceptable to shareholders.

My view is that they have not tried hard enough. Of course, an overall measure of employee satisfaction is a very broad issue but there are many indicators of EB performance which seem to me to provide a better assessmente.g.

-          Can the CEO recruit and retain great senior talent? ie business critical executives who either turn down offers to join or existing stars who become voluntary leavers

-          Overall employee turnover figures on voluntary leavers improve

-          Sickness/Absence figures drop

-          Ditto Employment Tribunals

-          Net Promoter scores strengthens ie the % of people who would recommend an outsider to join less those who would not

-          A fall in the premium over current remuneration which a new employee will need as an incentive to come aboard.  Truly top employers with great EBs will pay less because of the CV building reputation they provide.

It seems to me that this vital assessment of people related ability cannot just be one number and are a combination of actual behaviour as well as attitudes. Whatever the combination it needs to be a more respected set of measures than most REMCOs seem to seek. Maybe they need more familiarization with what really matters at work as demonstrated in the implementation of people and commercial strategy.

Final thought. How do HR facing people feel about their contribution to a measure of Executive performance ie ‘Staff Satisfaction’ which is so low in the table? What does that say to others about the importance of their work? What does that say about their preparedness to eyeball REMCO and show them a better way? What if anything do REMCOs know about the Employer Brand anyway?

Simon Barrow

simon@pib.co.uk

07 976 700 603