COMPENSATION TRENDS AND STRATEGIES FOR EFFECTIVELY IMPLEMENTING WAGE INCREASES April 5, 2016 Presenter: Carina Vassilieva
COMPENSATION TRENDS
AND STRATEGIES FOR
EFFECTIVELY
IMPLEMENTING WAGE
INCREASES
April 5, 2016
Presenter: Carina Vassilieva
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RETAIL IS GOING THROUGH A FUNDAMENTAL
CHANGE
Business has been flat since 2007
–Continued 2% GDP growth
– Increased competition in ecommerce
–Prudent and conservative customer base
Retailers are having to rethink every aspect of their business
–Merchandising strategy, what do customers want
–Channel strategy – Omni-channel
–Changing support services
This new reality will fundamentally change Retail talent management:
–Need to respond faster to customer expectations
–Need for innovation to lead the market
– Increased usage of a matrix organization, which adds complexity
–Focus on cost effectiveness and efficiency
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BUSINESS CHALLENGES
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Pressure to grow top-line
• Increased competition• M&A• More challenging consumer
Pressure on bottom line
• Need to control or reduce SG&A expense while managing a more complex organization
• Need to delayer the organization to increase speed and decrease bureaucracy
Investment in technology
• Fundamentally changing how stores operate• Causing a shift from bricks and mortar to online, which makes
store-for-store sales unpredictable and less of an indicator of financial health
Pressure on people
• Retail needs new talent with new skills at every level• Need to grow leadership who can work in a fast changing matrix
environment
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IMPLICATIONS FOR PEOPLE
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New jobs must be created
• Omni-channel jobs• Big data and analytics
jobs• One-to-one marketing• Technology positions• Store jobs requiring
more skill
New ways of working
• Team focused - working matrix
• Built around customer, not around silos, functions or stores
• Shift in power from merchants & merchandising to customer
• Working with constant change
Talent Gaps
• 75 million boomers retiring and 68 million Gen Xers replacing them
• A need to recalibrate the entire workforce (i.e. how to work in an omni-channel environment)
• Need to have people that can understand more than retail (international, FMCG, tech, etc.)
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IMPLICATIONS FOR PAY/WAGE
INCREASE STRATEGIES
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•Increasing performance coaching and not just the “once a year” event
•Managing performance will need to align with new role expectations and metrics
•Rewarding employees for performance and professional growth
•Career paths that align with filling gaps
•Capabilities need to be cross functional and future oriented
•Need to tie both personal and company results
•Rewards need to align with more efficient organizations
•Align pay with increased productivity
•Align pay with major corporate initiatives
•Must be more consultative and solve business problems
•Need to be more conceptual
•Have a sound understanding of business and analytics
•Still be able to control expense
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COMPENSATION TRENDS
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Element Trends
Base salary
Canada: Base salaries are expected to increase at approximately 2.6% in 2016
US: Base salaries are expected to increase at approximately 3.0% (at median) in 2016
Salary RangeStructure
Canada: Salary range structures are expected to increase at approximately 2.0% in 2016
US: Base salaries are expected to increase at approximately 2.0% (at median) in 2016
Modest increases
Modest increases
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COMPENSATION TRENDS
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Element Trends
AnnualIncentives
In recent years target annual incentives have been relatively flat, showing modest increases at executive levels
Most retailers continue to use 1-2 metrics in their annual incentive plans
‒ Profit measures (EBITDA, Operating Income, etc.) and revenue growth continue to be most prevalent in the retail industry
Long-Term incentives
Grant values have remained relatively flat since 2013
There has been little change in the mix of LTI vehicles, though there have been slow but steady increases in the emphasis on performance awards
Modest increases
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EXECUTIVE COMPENSATION TRENDS
Executive compensation continues to grow at a modest rate:
–Salaries and short-term incentives (“STI”) show modest increases;
–Long-term incentive (“LTI”) values are generally stable, with the mix of vehicles continuing its slow shift toward performance-based LTI
Say on Pay (US) remains an important indicator of shareholder views; shareholder support generally remains very strong
Shareholder outreach is increasing, with companies engaging major shareholders throughout the year to identify and address “hot button” issues
Boards and Compensation Committees are becoming more proactive in addressing governance elements such as CEO pay, performance, and succession planning
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GOVERNANCE TRENDS
PROACTIVE CEO MANAGEMENT
Historically fragmented conversations about the CEO’s succession planning, performance evaluation, and compensation are becoming more integrated to:
– Provide consistent messaging around roles, responsibilities, and expectations
– Enable a proactive approach to managing CEO pay, performance, and succession
– Mitigate risk of crisis scenarios
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SUMMARY
Retail is going through a fundamental change and will
look significantly different in five years
Omni-channel will significantly alter the customer relationship
– The customer controls where and when the transaction takes place
– Changes retail to a two-way relationship
The design of the retail organization will change substantially
– Value of existing jobs will change ― some will go up, some will go down
– New organizational structures
– New leadership approaches
– New ways of managing the business
A successful retail leader and employee will work differently in the future
– Leaders moving from directive and pace-setting to coaching and participative
– Employees going from execution to customer focus
– Innovation will be a constant
Reward must change to support these new business
structures, leadership values, and strategies
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TOTAL REWARDS FRAMEWORK
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w www.haygroup.comb www.blog.haygroup.com
© 2015 HayGroup. All rights reserved.
Carina VassilievaSenior Principal, Executive Compensation and Total Rewards
Tel: +1.416.815.6349Email: [email protected]/haygroup
Korn Ferry HayGroup
121 King Street West, Suite 700
Toronto, ON M5H 3X7
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