WorldatWork Total Rewards Conference & Exhibition 2006

WorldatWork Total Rewards Conference & Exhibition 2006
May 7-10, 2006, at the Anaheim Convention Center in Anaheim, California

What: Founded in 1955, WorldatWork touts itself as is the world’s leading not-for-profit professional association dedicated to knowledge leadership in total rewards, compensation, benefits and work/life balance. WorldatWork focuses on human resources disciplines associated with attracting, motivating and retaining employees. The 2006 conference in Anaheim attracted more than 2,000 attendees from some 35 different countries, and 160 companies showcasing products and services in the exhibit hall.

Conference Info: For more information about WorldatWork, go to www.worldatwork.org.

Date: Tuesday, May 9, 2006

Is CEO compensation a zero-sum game? The solutions that companies concoct to cope with challenges of the moment often have unintended consequences, according to David Swinford, senior managing director at Pearl Meyer & Partners in New York. For instance, take stock options, which were created to give CEOs ownership incentives for meeting performance objectives. Or look at the golden parachutes of the 1980s that were devised to fend off hostile takeovers. The most recent example of this phenomenon is the practice of backdating stock options, which was acceptable in the 1990s but has now engulfed UnitedHealth Group CEO William McGuire in a storm of controversy.

Does Swinford believe that the CEO compensation system is fundamentally broken? No. But he does think that companies should be cognizant that compensation structures that made sense in the past are not necessarily sensible for today’s business environment.

Swinford also stressed the need for companies to develop a compensation philosophy and to stick to their principles when hiring a new CEO. “Be prepared to walk away from a candidate if necessary,” he said.

A compensation specialist sitting in the audience swiftly challenged Swinford’s views. “I do not like what I am hearing,” a woman said. “The situation is not as negative as you are portraying it to be.” Swinford playfully responded: “If I ever give a speech that doesn’t stir controversy, please shoot me.”

Digging beneath the surface: The session on developing remuneration frameworks for China—led by Elliot Santner, compensation specialist from Grainger, and Chikage Nose of Mercer Human Resource Consulting—got off to a rocky start. There were technical difficulties with the microphones and the speaker system, which inadvertently streamed in loud noises from concurrent sessions. Within the first five minutes of the presentation, the sound specialist made no less than three separate trips up to the stage. “This wouldn’t happen in China,” an audience member said. “I wouldn’t know,” Nose replied, “I’m from Japan.”

The crowd laughed, and, it’s hoped, drew an important lesson from this incident: Asia should not be taken at face value. There are far too many nuances in the cultures, languages and business environments to take a simplistic approach. Take the variances in compensation structures within China alone. There are three different tiers that companies can use as a roadmap when creating remuneration packages.

Companies in first-tier cities like Shanghai, Beijing and Shenzhen can expect to pay out the highest salaries. Meanwhile, remuneration in second-tier locations like Nanjing, Wuxi and Suzhou can be 13 percent to 22 percent less. But if companies are really looking for a bargain, they should look for workers in cities like Zhongshan, Zhenjiang and Huizhou, where compensation can be as much as 30 percent lower than in first-tier locales. However, cheap doesn’t always translate to smooth operation, Nose and Santner point out. The less developed the city, the more difficult it may be to find qualified talent.

–Gina Ruiz

Day 2: Monday, May 8, 2006

Morning keynote: What would a conference be without a best-selling business author to give the keynote? For this conference, the speaker was Jason Jennings, author of Less Is More and It’s Not the Big That Eat the Small–It’s the Fast That Eat the Slow. There’s a reason why authors like Jennings, Malcolm Gladwell, Marcus Buckingham and others make such a good living speaking to HR and management conferences. It’s because everyone is hungry for leadership and management wisdom and hope that one of these guys has the silver bullet.
Jennings is good and has a good message, but no, he doesn’t have a silver bullet. What he has is this piece of advice: “Finding, keeping and growing the right people is the single biggest business challenge today.” He talked about his book research, which looks at 180,000 companies around the world–research that he says has identified the fastest, most productive and best-performing companies anywhere. Jennings named a few: Cabela’s, the world’s largest catalog merchant selling fishing, hunting and outdoor gear; World Savings; Nucor Steel; and Ikea. Jennings said a company’s culture “is the ultimate competitive advantage.”

I don’t want to work, I just want to bang on the drum all day: WorkatWork had an interesting way to get people awake and functioning for an extra-early 8 a.m. keynote Monday. A three-person troupe of taiko drummers banging away like the cast of Stomp. There were easily 20 minutes or more of headache-inducing drum pounding before the speakers mercifully came on. This is the ultimate way to get a crowd to appreciate the keynote and other presentations: Pound their brain cells into submission beforehand.

You can’t win over the comp committee without a scorecard: It took SunTrust Banks just under a year to overhaul its total rewards program in order to remain a competitive employer. SunTrust’s program is complex—there are 180 incentive plans covering the bank’s 35,000 employees, said Jo Anne Moeller, senior vice president of compensation and HRIS for the organization. Moeller described SunTrust’s case study during a Monday afternoon session and described one technique to engage and guide decision-makers in such a detailed and deep endeavor: Come up with the mother of all charts. So that senior management and the compensation committee could see where the bank stood in its current rewards plan, what should change and what the results of that change would mean to its competitive position in the bank-pay marketplace, Moeller and her team developed an at-a-glance chart that she described as “detailed but fairly concise.” Indeed. The chart is eight levels deep and 14 categories across. Moeller said the team that developed the plan had outside consultants, of course, but also involved representatives from SunTrust’s benefits, compensation and controller’s departments. “In my experience, when you have the accounting folks say, ‘Yes, those are my numbers,’ it makes the CEO feel better,” Moeller said.

Duel in the sun: Sometimes the best way to see all of the shades of gray of a subject is to examine it in stark black and white. That’s exactly what compensation consultants Jannice Koors of Pearl Meyer and Partners and Erin Bass-Goldberg of Frederic W. Cook & Co. did for the increasingly controversial subject of executive compensation during their workshop session “Dueling Consultants: Perspectives on Executive Compensation.” The “dueling” duo addressed both sides of the “800-pound gorillas.” Those are the thorniest executive compensation questions, such as impact of proposed SEC proxy rules on executives pay, whether CEO pay is too high and the effectiveness of various long-term incentives.
Their polarized examination helped highlight the fact that executive compensation is an emotional and complex issue, and is not governed by a fixed set of rules. Koors and Bass-Goldberg concluded that public companies are taking the issue of CEO compensation more seriously and, faced with new disclosure rules, are “self-regulating.”

–Robert Scally, John Hollon and Carroll Lachnit