Wednesday, 11 April 2012

CEO of UK Plc explains the proper process behind his pay rise....

Step 1. We value our team of Directors, we could not make profits without them, and we certainly cannot afford to lose any of us. We aim to be an upper quartile player within the market for our top people, and this way we can keep them. To check we are where we want to be, we've asked Potts&Fryatt to benchmark our pay against the market. We cannot remember how long ago we last did this.

Step 2. Jolly good job we did that benchmarking exercise. We are only in the mid quartile, and we will require a 57% uplift in directors salary in order to stop us all from leaving. This is why we get paid so much, because we have to make all these difficult decisions.  Good, now we are upper quartile where we belong...

Step 3. Clearly it would be unfair not to benchmark more junior staff. Benchmark them against the smaller competitors that are undercutting the business. After all, they are the ones we need to compete with. A constant challenge is explaining to the junior staff that they need to match the market be competitive is to safeguard their own job.

Step 4. Summon the departmental managers. Explain the benchmarking went really well. In fact it shows they are paid over the market mid point, and so is everybody below them. We must be competitive, so we should - at most, be a market mid point player. Tell them to be happy and grateful they've been getting over the odds for all this time. Tell them the Board will sombrely consider the difficult decisions we now face. There is a recession on. Explain that the cuts they and the junior staff now face are essential in the current environment. 

Step 5. Is it really eight months since we benchmarked? Our last modest uplift feels like a good while ago now. For the sake of our company, we need to go back to Potts&Fryatt - a loyal director has a responsibility to ensure we remain not only within - but comfortably within - the upper quartile. 

Step 6. Rats!! This is so unfair. We are back to being mid-quartile again! Damn this market, it really is highly competitive out there. Unless we agree to a further uplift of our own salary of 54%, we will be pegged back to the mid-quartile again, which obviously would be simply dreadful.   

Obviously, every board aspires to be in the upper-quartile for board pay, and our business plan will be ruined if we fail to achieve. Naturally, we don't feel at all comfortable with having to do this. Our jobs are filled with difficult decisions, they really are. Have I mentioned that this is why I must be paid so well?

Step 7. We at UK Plc & Co are a decent bunch, and it's only reasonable that we expect total adherence to our core values. Infact, we've put our values across the workplace via posters, as the plebs wouldn't know any values at all if it wasn't for our moral lead. We are pillars of the community and know it. Discretion and confidentiality are decent values and we will police them robustly. All pay, conditions and bonus arrangements, paid out of the kindness of the company purse, are wholly confidential. Any employee wanting to discuss the bonus of others is obviously some sort of left-wing bully - who would probably benefit from robust performance management.

Step 8. Set up an account with Potts&Fryatt to ensure regular benchmarking for director salary. Yes, I know…I know….but this is the only way we can keep moving with the market. Early signs are that this year we will only need an uplift of some 36%, so it's clear that UK directors can and do show restraint, and that benchmarking is the reputable, reliable and cutting edge way to ensure fair pay for directors going forward. 

General advice for implementation:

A HR Director with belief in benchmarking is essential. Since 2003, our HR Directors salary has gone from 54k to 284k. I am totally impressed with his sincere commitment to the principles of Benchmarking - he really does seem to believe in it. I am reassured by that belief. We pay for the best, and I'm sure he must be the best. His salary now indicates he is the best. My salary? I'm not going to answer that - you really shouldn't embarrass a gentleman with a question like that. Leftie types from the BBC may occasionally ask questions, this is just "the politics of envy" from people who don't understand basic market principles. Put them in their place as robustly as you like.

Most company boards aspire to be in the upper quartile for directors pay, so life's a constant struggle to keep it there. Last year we needed to absorb a further 54% increase to keep up. The kindest way, if possible, is not to tell anyone outside of the Board. There is no reason to forever trouble lesser mortals with all of the difficult decisions we are paid to grapple with.

The main thing to remember in these difficult times is this - shareholders and investors do read the papers, so it's very important not to be seen to be soft on pay. Make sure your workers know just how lucky they are to be working at all, ensure they are reminded of this daily. The decency of the core company values can make us all proud, so any breaches from these standards must be taken as gross misconduct. Good management is the delivery of workers smiling through the austerity ahead. 

Now go back to Step 1 and repeat.  It's fine if you want to pay hefty fees to consultants to ensure you get all this right - after all, top tier pay for top tier people is a complex and essential business. Good luck.

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