The Private Equity for Families Blog

Compensation Series—What is Your Company’s Compensation Philosophy?

Over the past two weeks, we’ve discussed how to create a culture of accountability and what is involved in long-term incentive plans. In the final installment of our compensation series, we take a look at some recent trends in compensation and ask “What is your company’s compensation philosophy?”

According to Verisight’s 2014 compensation report, 39% of the surveyed companies either did not have a formal incentive policy or they acknowledged they were below market. In addition, nearly half of those companies did not have a formal salary structure with grades, minimums and maximums.

Chart1_total comp

Where does your company fit in this chart? Are your employees motivated and aligned with ownership? Can you compete for talent without a compensation philosophy?

The next question is what measures do you use for your incentive plans? According to Verisign, the most popular short-term incentive measurements are based on organizational and personal performance.

Chart2_incentive

Most private equity firms believe in regimented compensation structures that tie pay to performance – both short-term and long-term. Because of our laser focus on shareholder value, we can’t afford to have misaligned managers who are not motivated in their current role. Compensation is not only a method of reward, but it also creates an immediate feedback loop between management and ownership.

Your insights are welcome

Periodically we will circulate this blog to a target market that includes successful families, wealth advisors and middle market business owners.

Please send us emails, articles, YouTube videos, tweets or even old-fashioned means of communication like voicemails, mail or a phone call on the topic of Private Equity For Families. All ideas are welcome.

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Rob McCreary

Rob McCreary has more than 40 years of transactional experience as an attorney, investment banker and private equity fund manager, and has spent his career in building entrepreneurial organizations with successful track records Founder and chairman of CapitalWorks, he is responsible for developing and maintaining senior relationships with investors and portfolio governance.

This blog represents the views of Rob McCreary and do not reflect those of CapitalWorks or its employees. This blog is not intended as investment advice. Any discussion of a specific security is for illustrative purposes only and should not be relied upon as indicative of such security’s current or future value. Readers should consult with their own financial advisors before making an investment decision.

Private Equity for Families Blog | CapitalWorks Private Equity Cleveland Ohio

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