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Case Studies

Here are a few of our recent high impact client partnerships

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Compensation Benchmarking in the Manufacturing Industry

Challenge

Our client had no framework to determine if pay practices were competitive with the market, and managers were not savvy about administering and communicating compensation.


Solution Deployed

We researched available compensation survey sources and recommended the best surveys for our client. We worked with managers to update job descriptions, and we benchmarked positions to the market data. By analyzing market data and internal equity, we were able to develop a salary structure quickly in time for the annual compensation cycle. After developing a toolkit for managers, we trained managers on the basics of compensation administration and prepared to talk points to help them communicate compensation decisions. Because many employees’ base pay was significantly under market, we recommended that our client defer part of their merit budget towards market adjustments, and prioritize the market adjustments for top performers in key positions. Market pay adjustments were phased in over a multi-year period, and the remaining merit pool was heavily differentiated based on employee performance and base pay comps-ratio.


Business Value Delivered

By providing tools and training, managers became better stewards of company resources, and employees had a better understanding of the client’s pay philosophy and practices. The multi-year strategy for market adjustments was affordable and helped the company remain competitive. Differentiating pay for performance meant the highest performers were adequately rewarded, and employee retention in key positions increased, reducing business risk.

Board Brawl Averted

A Board of Directors disagreed about whether pay levels for the executive team were appropriate. A discussion with the Board revealed that each Board member was bringing different values and expectations to the pay review process. CW took the Board through a Compensation Philosophy development tool that allowed the Board to air their differences and reach consensus about how pay should be viewed. A market analysis was conducted using the newly adopted compensation philosophy and a new base pay, cash incentive and equity plan were implemented. The Board and the executives are all comfortable with the new direction, and the Board meetings are much more fun!

Rethinking Pay Entitlements

An organization with very long tenured employees had hundreds of different job titles and significant complaints about internal equity. We conducted a complete assessment of the compensation program. As a part of this assessment, CW identified many important changes that needed to be made to the pay plan. $500,000 in annual salary expenses were going to employees who had been promoted and then demoted when they were unable to perform at the higher level. These individuals continued to stay at the higher pay grade and continued to earn pay increases every year. Although the CEO had previously committed to never reducing pay grades or capping employee pay, he realized a change was desperately needed and decided to re-think his position.

Pay caps were introduced, and some individuals had several small pay reductions spaced over several years. The affected employees were disappointed but realized that they had benefited for many years from the higher pay levels. Several employees expressed surprise that the company waited so long to correct their pay.

The organization was able to use these movements to market rates to incentivize and reward others increasing team morale.

CEO Pay Negotiation

After five very successful years, the CEO’s employment agreement was coming up for renewal. The CEO asked CW to provide him information to use during his negotiation with the owners and the Board. Rather than provide the CEO with salary information, CW engaged with the Board. Using market data as a driver, CW worked between the Board and the CEO to ensure agreement and understanding of the compensation philosophy and the benchmarking process used. Based on the analysis and discussions with each side of the negotiation, a revised employment agreement was quickly and painlessly reached. Both sides felt they had an opportunity to air their perspectives and were pleased with the final recommendations.

Stock Options Were Not an Option

With a critical business transition looming, there was concern that the CEO was at risk of leaving and that the pay package was not at market rates. We conducted a thorough analysis of base pay, short-term incentives, long-term incentives (equity equivalent) and perquisites. Target pay rates were identified based on a combination of publicly traded and privately held pay packages.

A faux equity plan was developed to bring the pay levels up to a blended market pay rate, which focused on shareholder return with a four-year vesting horizon and a grantor trust created for the purpose of supporting the non-qualified benefit obligations of the employer to their employees. The plan included a kicker for the first few years that provided employee retention until the full plan took effect during the 4th year. Moreover, the annual discretionary bonus was revised into an incentive program that measured short-term results and balanced the long-term focus of the faux equity plan.

A Complete Revision

A bio-medical organization requested Compensation Works’ assistance to achieve the following goals:

  • Review existing strategies, practices and policies related to compensation across the organization;
  • develop a robust compensation structure that could be implemented and executed consistently for the next several years;
  • Provide guidance and recommendations for implementing the changes; and
  • Assist in the development of a communication plan for each stage of the project.

To achieve these goals, Compensation Works (CW) reviewed the existing compensation structure and practices to identify critical needs and worked with the executive team to determine a compensation philosophy. With a clearly written philosophy in place, market benchmarks were established for approximately 60 positions within the organization including 20 science/research positions and 40 administrative and management positions.

Local, national, cross-industry and industry-specific salary survey data were utilized to conduct the market assessment for each job. The market assessment included an analysis of salary survey data for similar-type positions; to be included 80% or greater job similarity in function and requirements was required for each match. Two formal salary structures were created using this data: one for scientific positions and another for administrative and management positions.

CW developed guidelines for managing the new system and conducted a full evaluation of individual employee pay levels establishing a projected budget.

The project took approximately three months and resulted in a clearly defined compensation philosophy and strategy. Employees were informed via company-wide email and face to face communication during open discussions in all staff meetings. Managers partnered with CW and Human Resources to understand the impact of the new system during the annual performance evaluation and pay increase period. Due to the clear communication and implementation process, the bio-medical organization was successful in establishing their new pay system. It has now been in place for over five years and is continuing to bring value to the new HR Director, overall team, and shareholders.

Growing Pains

A high-tech company had grown to a point where it was no longer feasible to have one or two individuals making pay decisions for the whole organization. Also, employees were bringing salary information off the internet and asking questions about how pay decisions occurred. It was increasingly difficult to have these pay discussions with the team members.

Compensation Works (CW) was brought in to develop a new compensation structure, pay practices, and a new broad-based equity plan.

CW trained all of the managers who had the responsibility for making pay decisions on the new compensation system. The training included case studies, how to talk with employees who come in with internet salary data and other career progression and pay concerns.

At the conclusion of the project, our high-tech partner had a customized compensation system and trained employees to allow them to attract and retain a competitive workforce while maximizing stockholder ROI.

Are You Ready for Pay for Performance?

A large heavily unionized organization wanted to move to a pay-for-performance model for their non-union staff. There was concern that moving to a pay-for-performance model could result in additional unionization.

Compensation Works (CW) conducted an assessment of the organization’s compensation practices and perceptions. Through a series of interviews, surveys and data analyses, the organizational culture and pay-for-performance temperament were assessed. There was distinct interest throughout the organization to move to a pay-for-performance model which supported some new lean and quality initiatives.

CW developed a comprehensive three-year implementation plan. The plan included:

  • a streamlined and re-aligned base pay plan,
  • an internal assessment of every individual’s current pay rate compared to a new pay placement table and the new pay rates
  • A new performance management program that was implemented over a three year period.

Take the Stress Out of Pay Discussions and Decisions

A professional services firm was managing their pay differently for different parts of the organization. Concerns about pay discrimination and internal equity drove the need for implementation of an organization-wide and consistently administered compensation plan.

The new program included market analysis of all jobs, development of a new pay structure and incentive plan. One of the key managers was extremely resistant to the new process and the new structure. The first year he sat in the meetings with his arms crossed and scowling. We continued to work with him and the team in the following two years. By the third year, he bounced into our meeting all smiles. He explained that he was finally able to explain pay decisions to employees, and the new tools have made his life much easier.

Inconsistencies in Payroll Practices

Challenge

Our client was concerned that employees were not being paid in accordance with the client’s policies and state and federal labor laws and regulations.


Solution Deployed

We conducted a full audit of the client’s payroll practices, examining all payroll calculations, application of HR and payroll policies to actual payroll payments made, and segregation of duties within the payroll and HR teams. We reviewed their employee handbook and payroll procedures and researched state and federal laws and regulations to determine if their pay practices were consistent and compliant. We interviewed Payroll, HR, and Finance personnel to validate our initial findings, and we presented our client with a detailed audit report that included recommendations for resolving each of the issues that were identified in the report.


Business Value Delivered

Our client reduced their legal risk by implementing our recommended changes to payroll procedures that resolved several issues uncovered in the audit.

A Change in Ownership and Divestiture of a Company Division

See how we helped our client during a change in ownership and the divestiture of a company division
Challenge

Our client had two owners. Owner One sold their ownership percentage to Owner Two, but also gained full ownership of a division of our client’s company with approximately 30 employees, and Owner Two planned to absorb our client's company fully into their operations. Our client’s HR department did not have the bandwidth to handle this volume of work and retained us to help with employee communications, managing the divestiture of the group of employees to Owner One, and the integration of our client’s company into Owner Two’s operations and systems.


Solution Deployed

We worked with Owner One’s HR team to establish a communication plan for the transfer of the group of employees to them that coincided with the announcement of the change in ownership. Owner One wanted the transition to be as seamless as possible, so we developed recommendations for how compensation and benefits should be handled for the group of employees. We partnered with Owner One to develop a personalized communications packet for each affected employee, and we represented our client on the day the ownership change was announced to answer any questions the transitioning employees had. We also partnered with Owner’s Two HR and communications departments to develop and coordinate the global logistics and communication plan for the change in ownership announcement. We established a specific mailbox to handle employee questions and had an online Q&A that we updated weekly. We worked with our client’s management team to identify key employees and developed and implemented a plan for retaining these key employees.

We represented our client on Owner Two’s HR integration team. We had payroll, HR systems and benefits fully integrated in just over three months and helped our client manage a small downsizing when business operations were integrated into Owner Two’s operations five months after the change in ownership occurred.


Business Value Delivered

Business operations were seamless, and the ownership change was transparent to customers. The quick integration of payroll and HR systems saved tens of thousands of dollars in payroll processing and HRIS costs. Affected employees were so pleased with how the transition was handled that productivity did not decline, and voluntary turnover actually decreased for the first 24 months after the integration with Owner Two’s operations.