Employing agile reward strategies for a volatile world

Organizations are grappling with unprecedented reward-related challenges. What strategies and actions should you take in response to the evolving health emergency? How do you prioritize changes to your reward programs? What implementation actions are most effective in a volatile health environment? We'll discuss the challenges and impacts of the current global situation, and share learnings from prior disruptive events.

Donna Lehman

And now I would like to introduce you to your host Don Lemon.

Don Lowman

Hello, everyone, and thank you for joining this webcast. This is our fifth webcast. The Korn ferry is doing in the series, there will be several more to come, which we'll talk about later.

But thank you and we hope you're safe and comfortable. Wherever you are, the next hour that we're spending together. We're going to cover a lot of ground. A lot of material on what are

What we're all facing with respect to decisions around rewards in this unprecedented time before I get into this

The where you see me broadcasting from is my basement. I have a 25 year old who's home from Brooklyn, New York, where he decided to safe distance in Connecticut, rather than Brooklyn.

And he asked me today. He said, you know, this feels like kind of a Wayne's World broadcast your in your basement broadcasting.

About things he said, Are you going to talk about heavy metal rock and roll. You're going to talk about favorite movies. And I said, No, we're going to talk about pay

And he kind of turned around and walked away. So, so hopefully you have more interest than than he does in the subjects. We're going to cover today. We are in in unprecedented times

We've lived through health crises before over the last 2020 years we have lived through recessions in the last 20 years

But it's never been the case that I can recall the two have happened together and that makes this uniquely challenging and in really difficult for us all.

Obviously, our first concern is people's health and safety. We care very much about people and whether or not they're going to have jobs. A lot of people are worried about whether they're going to have jobs when

The economy will turn around and how long we're all going to be safely ensconced in our homes. So we have a lot to cover today. We've assembled a panel of experts that collectively have more than 125 years of experience dealing with rewards issues.

Talk a little bit about that our agenda will introduce our various panelists.

We will be doing a number of polling questions today to get real time information about how we're all coping with the current crisis and things that we might already be thinking about with respect to rewards.

I'm joined by Amanda Wellington, who is a leader in our workforce rewards practice Todd McGovern, who's an expert in executive pay mark when who is in Europe and is my counterpart.

In running our rewards and benefits business in the in the media and Joe to me. So who's an expert in Salesforce rewards and you'll hear from all of them.

We're going to try to keep this conversational as we go. And there will be chances for you to to raise questions with us and and then we'll also tell you where to find out more information at the end of this

At the end of this webcast. So as I said, we are going to do some polls and and what I'd like to do is to start with our first poll

And this is one where we asked you to select only one, to what extent as your company felt and negative economic impact of coven 19 so far.

So the choices and again select only one we've not experienced with significant negative impact on our results.

Second, we've experienced some impact, but it's too early to quantify how much third we've experienced the modest impact.

20% or less reduction of near term revenues forth we have experienced that significant impact more than 20% reduction on your term revenues.

Last the near term impact has actually been positive for our revenues. So I'll ask each of you to select only one and we'll tabulate the results and then give you a sense of where collectively we are right now in the in the environment.

DLehman

We still have people voting give it one second.

DLowman

Okay. Will do. Thanks.

Okay. And what we see here is the responses are somewhat over the lot. But most of us are not most of us, but a large number of said we've experienced some impact, but it's too early to quantify, which is not surprising

But there is a large number or 5% 21% that have already experienced greater than 20% reduction of near term revenue. So obviously we're all in different circumstances which means that we're all probably in different circumstances with respect to we're thinking about on rewards.

I'm going to ask. I'm going to ask our panelists a few questions in a second. But before getting to that I'd like to just tell you some principles that we are

Recommending that our clients, consider as they make decisions and as they approach making decisions about rewards in this environment.

First is to make sure and I'm sure this is the case with everyone on this, on this call with within your own companies, but

Make sure that employee well being. Is your, is your Paramount priority is the most important thing right now that that our people care about

Second leaders needs to lead by example. And we've seen some examples. And we'll talk about them during this webcast, where

Some leaders have already decided to forgo their own base salary or to take other changes in their rewards before making any other changes with respect to rewards for others.

It's very important for leaders to lead by example, to make sure that everyone knows that we're in this together.

There are be direct with employees and treat them like adults, the honest with your communications be timely with communications.

Tell them what you know, let them know what you don't know. But absolutely, make sure that people feel well informed and and that you're that you're that

You're talking to them as as adults. Fourth, the fourth and fifth ones are actually related to each other. Be balanced when assessing labor cost reduction alternatives.

And fifth, remember this is temporary and prepare for a rebound. It may be tempting. It may be easy to say, Boy, if we've got a 20 or 25% reduction in revenues and we don't know when things are going to turn around.

It would be easy to say, well, we've got to take a 25% or 30% reduction in our pay so that we can make sure that costs are on with revenues, just remember

As you make decisions like that. This is going to turn around. We are going to have a rebound and so we need to make sure that as we make changes now.

we contemplate what we're going to need when we come out of the crisis that we're in.

And finally, this is really important. Taylor actions to fit your organization, we can learn from others and we'll learn from each other today.

Or remember the best practices, what is best for you and we'll see that

Companies in the same industry aren't in the same circumstances companies in the same country are not in the same circumstances different countries, obviously are in very different stages.

Of the crisis. And so it's really important to consider where you are, as you start to think about changes.

Okay, before we dive into the issues in detail. I'm going to ask our panelists all to register an answer to the following question, and that is

What, what are we experiencing today, right now, what are, what are some of the things we're observing what are some of the things that our clients are most challenged by and to begin with. I'll go to Amanda Wellington to talk a little bit about workforce rewards, Amanda.

Amanda Wethington

Thanks, Don.

Like many of us. I'm working at home, which means the whole new way to structure working hours while taking care of what we have our six months old and a two and a half year old so

It's currently lunchtime leading into nap time here. So the background noise at my house might include some of the feelings that happen on a daily basis around here during this so

But thanks for having me and let me get to your point on here.

You know what we're seeing as

employment and wage continuity are the dominant concerns of both employees and employers so many organizations are focused on helping their employees and customers with immediate safety and security needs.

Recognizing the immediate and short term financial impacts for their business, particularly around people spend. Communication should be supporting employees to be calm and smart about how they deal with the situation.

Getting to your principal Don about leading by example. And a survey earlier this month on that most Americans are worried more about their finances and their health amid this coronavirus outbreak. So by a three to one margin.

This would suggest that there are significant concerns with employees financial viability during this crisis, especially if it's drawn out over an extended period.

The facts are that 80% of Americans live paycheck to paycheck and 60% of the working population has less than $1,000 in savings. So these are real issues impacting all of us that will help give some context on how to lead your workforce during these times.

DLowman

Awesome. Thanks, Amanda.

Todd, over to you with respect to executive peg.

Todd McGovern

Thanks. And hello everyone.

I'm working here remotely in Chicago. So you may hear a dog in the background, the barking or you may see an 11 year old running in here, breathlessly asking to use the Xbox.

So hopefully that doesn't happen but done to your question. We seed significant variability in the responses and executive conference everything from wait and see.

too dramatic responses by some of the companies closest to the epicenter here.

We're going to talk through why that is and what companies can do about that when we get to our section, we'll also talk about the critical role that REM codes are kind of committees can play in making that happen.

Thanks cloud before we go to Joe DiMisa to talk a little bit about Salesforce rewards mark when I wonder if you could share a little bit of perspective on matters outside of North America in Europe and elsewhere.

Mark Quinn

Sure, good afternoon from sunny Edinburgh. And so from organizations who are at the center of the crisis and geographically what's emerging is that there is a focus on people first keeping the lights on second and planning for the future. Third,

This goes for both business as a whole and the way which reward folks are planning on changes to the reward programs for employees.

So, some countries are more effective than others, right now, and based on how companies working in those countries are are responding. I hope to bring some insights into the webinars we got

DLowman

Excellent. Thanks, Mark. And then finally, Joe DiMisa with respect to Salesforce rewards. What are some PowerPoint observations, you can share.

Joe DiMisa

Yeah Thanks. Thanks, Don and I agree with Amanda mark and Todd similar type situation, what I'll add is that for Salesforce.

This is uniquely different just based upon the fact that

The majority of sales people or a large percentage of sales people earn a good portion of their total target com through incentive pay. It can be as much as 50 or 60%

So when sales opportunity shut down when selling efforts shut down, it really affects them. And so you know what we're advising is we're advising a lot of communication. We're advising doing some sales specific surveys

Specifically to understand our reps perspective understand what's going on in their personal lives, but also in their professional lives with their accounts.

With their forecast with their opportunities to show them that that you care into communicate again that that you're looking to enable them to be successful. And we're going to talk about some of those enable

Concepts in a minute. But again, communicate, communicate, communicate is his biggest thing.

DLowman

Alright so that is really helpful. It gives everyone to on the call a sense of what what issues we're going to get into as we get into the details of each one of these different segments of the workforce.

And rewards for them. We're going to share a lot of examples with you of things that companies already starting to do and and what some of the

Different impacts might be okay. I think now we're going to turn our attention to workforce rewards, which is where a lot of our attention is focused. I know right now as far as what companies are doing. So Amanda over to you.

AW

Sure, I'd like to start with a polling question. So it's up here on the screen. So what actions have you taken or are you contemplating to manage your workforce rewards excluding executives.


So please select all that apply. And the 10 choices are reduction and overtime pay base salary freeze, base salary reductions short term incentives bonuses reduction deferral or delays reduction and benefits and perks increase in overtime pay increase in base salaries or one time bonuses.

So again, please select all that apply to your non executive workforce.

DLowman

And as we're tabulating the results.

One thing I'll let you know is that Korn ferry is actually running right now a global pulse survey.

On rewards in this environment and it's possible to participate in that. If you haven't already, if you go to the Korn ferry website, you can find information and details about how to how to participate. We hope you will

Because I think real time information is helpful. So here's the results of the poll, Amanda.

AW

So I'm not results on my, my view. Okay, well Don if you couldn't do them and record them our. Yes. Yeah.

DLowman

I will share the results. Sorry. They just yeah here we go too soon to tell, we're still delivering that 60% and then there's a pretty even distribution with respect to everything else in the poll. The one thing I can see that reduction in benefits and perquisites is actually creating a low increase in base our is only 2%

One time bonuses 9% short term incentive bonus reduction is step 17%. So there are a lot of different things that companies are doing

But for the most part people said it's too soon to tell, we're still deliberating and so that suggests that there is some wait and see attitude.

And outlook and maybe this this webcast will be beneficial as you consider your deliberations. So with that, let's get into our first question. Amanda and mark as well. What are organizations doing right now in terms of wage and benefits continuity things done.

AW

So as I mentioned earlier, employment and wage continuity are the largest concerns after health and safety.

We are seeing sizable impacts on the workforce, but it differs across sectors geographies, so healthcare's focus is very different than travel or we're work at home is permissible, there is less of an impact potentially than a manufacturer who is employees cannot come into the plant.

So organizations are clarifying their employment benefits and pay policies and making exceptions to these policies, given the exceptional time

And all of these changes are being considered against the backdrop of the actual or proposed to government support.

So we're sharing some of the challenges and actions organizations are focused on right now.

70% of all hourly workers in the US, do not receive sick time compensation. So there is an emphasis right now in reviewing

Sick leave policies workers are staying home or away from work more frequently. So there's also a review of the attendance policies.

Healthcare is currently focused on staffing shifts. Some are offering higher rates, but there's also an escalating focus on equipment and process their organizations that are deemed essential are also trying to keep up. So grocers Amazon Walmart, Target, they're currently hiring and some are offering additional pay per hour or double the overtime rates of pay.

In the gig economy Amazon Instacart door dash Uber, Lyft they've promised to give gig workers up to two weeks of sick pay, however, with limited testing. It's unknown what financial health may be available for those individuals catastrophe pay is also another

Consideration for employers to some companies like Starbucks are offering four weeks paid for employees, not just for sick or health impacted employees.

Information is quickly evolving and leaders are identifying how, when and what to communicate.

So you'll hear a common theme throughout this today is that, you know, leaders having compassion and empathy, while making those decisions is important.

And we've also heard some are just starting to think about the impact on incentive plans and goals marriage or annual increase delays or

Or slowing those down and then other organizations like Marriott are offering 20% pay for employees temporarily out of work for benefits continuation and then a few other things we've seen

Here are some supplemental payments to SELECT Employees Facebook has awarded $1,000 bonus to employees to survive the pandemic JP Morgan paid it's frontline employees.

$1,000 and then organizations are also reviewing their medical plans for telehealth options and wellness programs as well as clarifying employee disability benefits. So that's some of what we're seeing is starting to happen and get some traction. Mark, what else are you hearing globally.

MQ

Thanks, Amanda, you referred to different kinds of support that that exists from a governmental perspective. And that's certainly true in other countries in the US, Europe in particular.

Where there is historically focus on employment rights, rather than implement it. Well, so, so many of those protections that you're talking about are are automatically in place.

And the impact of that I think is kind of interesting. We had some data just come in from Italy overnight, where we polled just over 250 companies.

And they said, two thirds of those organization believes that there's only going to be a marginal to obvious impact on on remuneration so so that shows that those that some of those infrastructures are in place was actually being loaded in there as well.

A number of governments have put in place approaches for temporary layoffs.

These differ country to country, but tend to involve governmental paying a percentage of salary for third load workers to a cash limit.

So far we've seen these approaches unveiled in number of countries, France, Spain, Germany, Norway, the UK.

And take up is fairly rapid example is is France where over 2000 companies I've requested this partial unemployment pay procedure to cover over 400,000 employees.

DLowman

So thanks for that as we think about different industries and maybe Mark I'd ask you to weigh in a little bit here. As far as what's happening globally as well.

Obviously, different industries are in different situations. I wonder if you could talk a little bit about what some of the differences are that we see. And again, maybe Marcus cause some of the things that are happening globally as well.

MQ

Sure. So, so we've summarized on this slide, some of the actions that that we've talked about with with our clients and they're not exclusive.

By industry here by any by any means, but they are the predominant set of actions. So for example in manufacturing. We've already touched on TARDIS touched on this question around bleeding from the top on pay reductions.

Equally, we're talking and seeing early engagement in terms of negotiating with with employee representative bodies on what may be medium or even long term changes that would be required as organizations go through this

Impact these sets of impacts and again Amanda has taught from a, from a services perspective around even staffing increases in that sector as it applies to logistics and some service organizations financial services slightly different approach.

A separation of workforces into kind of Red Team Blue team approach. So dividing the workforce into two and and using that workforce on a differential timescale to support customers, either in person or or or from a distance. So that's something that we're seeing in in financial services.

And in fact, that kind of Red Team Blue team approach. We have seen in China as a way for organizations to reintroduce

People, as they are returning back into a more normalized work environment. Finally, the points around health care. Again, just echoing that

You know, this is first and foremost about supporting the front line in hospitals and primary care and focusing on the emergency not on the business of healthcare.

DLowman

Excellent. So, man. I'm going to come back to you again again as companies are thinking about not just the immediate term, but sort of mid term and longer term.

Talk a little bit about what what approach, they can take what process that might make sense for them to think through this. This next set of challenges over the coming weeks and months.

AW

Sure, Don, so as we are seeing uneven impacts on sectors we're proposing this framework to help manage labor costs during the period of uncertainty. The organization facing a decline may resort to

Across the board salary or job cuts. This can be damaging to employee morale, or send a message that the company's in trouble or panicking.

To taking a broader view of the cost of reward enables you to see that there are many options.

So the first phase is to look at your rewards strategy and involve a team of leaders to determine the what the why and the how of labor cost management programs.

So as Don had mentioned earlier, we want to caution over reaction. And this could also apply this this framework for organizations experiencing a surgeon demand.

Many of us are applying these changes on the fly from. And so that's why involving a team of leaders is helpful to get those varying perspectives.

Phase two would be developed a multi pronged approach on managing labor costs versus relying on a few traditional approaches such as layoffs.

So there are dozens of ways organizations can manage labor costs of reducing hours work weeks or unpaid lever sabbaticals lessening reliance on contractors eliminating over time, delaying bonuses or merit suspending certain benefits like retirement savings.

Or tearing the impact of pay decreases and that's just a few examples. I know there's many out there, but this is also where organizations can plan for meeting their staffing demands, it's important to understand the broader impact of the different options on your business.

So exploring multiple options and can be quite helpful. So for Phase three as you assess the impact of that cost management opportunity. You want to look at. Also the employee relations risk.

So the key point is that organizations need to model what kind of financial impacts, they will get against the type of employee relations impact that the action will have

So this is not just on the employees being affected but on the organization as a whole and then phase four is to implement with care embassy and thoughtfully planned communications and be able to change course.

As needs dictates overall leading with compassion line executives can overlook the employee relations impact or jumped to alternatives such as restructuring or wage cuts our point

Is to know what your options are and to assess the trade offs of those options and given this is unprecedented time

So many businesses, schools facilities are closed their stress on work and health and caring for others. That's escalating the stress on our employees. So, some may value to the flexibility of unconventional solutions if layoffs can be avoided.

So back to you, Don.

DLowman

Thanks, Amanda. Thanks, Mark, thanks for framing that out. I think that's really helpful as we start to contemplate exactly what we ought to be doing and how to do it.

Todd. We're going to come to you and also Mark again, but, you know, at a time like this, it would be easy to say that, you know, executive pay shouldn't be something we're really thinking about.

That should be the last thing on our minds, we need to focus on the workforce.

And yet we know that's not the case, just based on many public examples that we've seen so far, like companies taking action to just provide a little perspective about where we are right now with executive pay and what some companies are thinking about

TM

Sure, absolutely. So as we just heard from Amanda companies they're in all different places of intensity related to the crisis.

So it's not surprising when you see some of the pulse surveys are all over the internet say half the companies are doing nothing.

With executive comp. And then there's a whole cadre of other companies that are making dramatic actions.

So how does the company navigate that this environment. How do they, how do they figure out what to do around their executive compensation programs. So what we've done. We've put a little frame of reference.

For everyone, it's up on the screen now to kind of show you and guide your thinking about what you should be doing.

Around executive comp you look in the bottom right quadrant, the, quote, high, high companies, these are the ones taking all the press right now.

That the Marriott CEO who gave back a salary and the rest of the executive team took a 50% pay cut this is United Airlines, where the CEO and COO both suspended their salary for the rest of the year so that that quadrant.

Is pretty clear what's going on. But actually, most of the companies are in the upper left the, the lower lesser lesser lesser quadrant where there's still

Some impact, but it's not as dramatic and that's actually where most of my clients are today and how we're counseling them is monitor the situation wait and see. But think before taking any action.

But, you know, things are evolving done as you know where you may have been on the grid. Two weeks ago, not where you are today. It may not be where you are two weeks or a month from now as an example.

We just did a retail webcast on Friday. And even though 90% of those companies are closing their stores.

That same 90% are continuing to pay their employees. So there really hasn't been

An impact on the broader workforce yet so correspondingly, there really hasn't been an impact on executive comp only 5% of retailers have consecutive salaries.

And very few are looking at changing incentives today, but they all said if this thing last more than another three to four weeks, all bets are off and things will really dramatically change, they'll move to a different place on the grid.

A company that we just saw this week moved on the grid.

General Electric.

In a wait and see mode, up until they figured out that the impact of the airlines was going to dramatically reduce

The supplier sector there. So they're aviation business is making some big changes. So the corporate CEO of GE and the business unit head of GE aviation a both voluntarily give them back their salary for the rest of the year.

In the midst of significant layoffs that will be occurring in that business.

So, what we're telling you. And the key messages takeaway here is this relates to done principles is that we think your exact cop changes should align with the intensity of the impact that your company is facing at least that the US perspective, Mark. What do you think?

MQ

Todd, I would tend to echo exactly what what you're talking about. If I did a quick talk around with colleagues who have been in RAM coast in the last four or five days.

And the temperature is very widely in relation to the degree that businesses are being affected and you know where they sit on the grid that we were just talking about. I think there are a number of principles that are coming out.

As the most common set of approaches, particularly as these relate to financial year 20 year and payments, right. So, so the three factors.

Being balanced or about the employee experience both at an all employee and executive level, the investor experience.

And so finally, the impact on performance of support from public money, but this is being made available to companies because that could have a critical difference on company performance and should not have an impact on executive pay

DLowman

Excellent. I know there's a series of questions that are coming in and we're going to try to keep track of those and

We will try to address some of those in real time as well as at the end, but we are where the number of you have questions, will we will try to get through them next segment. Mark, Do you want to walk through our polling question.

MQ

The next thing that we would like your input on now is this question of what actions you have taken or are planning to take to manage executive and again it's a multiple choice question so too soon to say no change.

Are you looking at base salary freeze or base salary reductions changes.

In terms of short term.

Incentives or long term incentives revision to incentive performance targets as I just touched on or reduction in benefits. So if you wouldn't mind answering that. Now, by the way, one of the questions.

Just, just to respond to one of the questions that was on the Q&A

Is about the number of pulse surveys that we're doing. So just clear we're doing

We're doing one global survey. Now we've done one for China and Malaysia, one for Middle East and one for Italy, but now with move to a global pulse and we will be providing output on that by country and by region, and we're going to look for sector splits as well.

So please do participate and be lookout for that.

DLowman

So again to point results back

And Mark, can you see the polling results yourself or not.

MQ

I can, yeah.

So too soon to say for 70% of people, which is pretty much to be expected. Right. And then the, the, in terms of change activities. I'd say short term incentives, Revision to incentive targets, and base salary changes.

But all of those kind of feel behind no change expected as a result of covered 19. So at the moment, I guess we're in a developing situation, it will be super interested to see people's responses in probably three to four weeks time right

DLowman

Absolutely, yeah. No question about okay so

Hard to start with if if remuneration committees are going to be proactive as we expect they will be in. I know they're all in different situations. Some made decisions.

Three or four weeks ago that may now feel out of date and others yet to come. What should remuneration committees do to be proactive.

TM

Great done. So as we've seen remuneration committees or compromise accused Rambo as a broad term for the rest of the presentation.

The ball become a lot more active in the last five years. That's clear. What we're asking for now though is a different level of intensity and productivity from them.

Over this next year. Specifically, there's two questions that we want them to address immediately. The first one is how acute is the impact of the current crisis on their specific business, how close to that high, high scenario, are they

If they're going to be making dramatic actions around the broader employee population.

We think they should be at least considering reductions in executive salaries and or board member retainers, because as we go back to our principles down that you laid out. We think executives.

Or leaders should lead the second critical decision to make. In the next 30 to 60 days is what are you going to do around exceptions or adjustments many plans.

Have the facility for adjustments are exceptions, but they typically don't include catastrophes like pandemics. So what our company is going to do in this scenario.

We don't think you should wait to the end of the year, we think you should address that as soon as you can.

Questions like, are you going to make adjustments on a country basis, on a regional basis, maybe on a global basis.

Is that for all employees. Is it just for executives. What about business units. There are more effective or less effective. We think

We think questions like this, the comp committee should be or the REM coach should be wrestling with immediately. So they have a perspective on that mark. How does that line up with you, Mark?

MQ

Yeah, I think that's exactly right.

The covered outbreak has sent equity markets into a bit of a spin

And, you know, messaging is very important, both in terms of communication with shareholders privately and and through annual report documentation.

And you know how decisions around executive liberation observed, and it seemed internally.

So one theme which is, for example, in trying to the UK corporate governance code is renumeration committee should consider paper executives in the context of wider workforce remuneration so that that that theme around equivalence and proportionality is really, really important I think.

DLowman

So, obviously, as I said, some companies have already made some decisions in the last month or so we now in the US have the US Senate hopefully voting on a bill today that incorporates into it.

Various restrictions on executive pay for any

Companies that might accept government loans.

Are all called a decision, the company's made sort of out of the water or, you know, sort of,

Redundant now and they have to go back and rethink or what would you suggest

TM

Yeah, good question. Don, I don't think the REM CO or the consummate I don't think their hands are tied quite yet. In addition to the exception process that

We said should be very high on the agenda. One of the things that we need to look at more in the medium term, the next maybe two to four months is

Whether they should do something with the short term incentive or the annual incentive, you get through a situation where the difference between target and actual is too big to credibly bridge with that exception process.

You probably want to stop frankly your annual incentive plans to spend it, and maybe relaunch it for the last six months of the year where pay is reduced, obviously to 50% but you're able to set goals that that are more real time and line up better with how the rest of the year is going to going to go that's on the cash side, Mark, I think you're going to talk about what companies are doing around either pushing out equity grants or being smarter on the grant level.

MQ

Right. I mean, I think when it comes to share two grants for shaft lands. This use of discretion is going to be particularly important.

And, you know, run code at the moment are really wrestling with this and it either, you know, the point that you say about pushing out the point at which you you're actually going to make a new awards.

Or alternatively, just making sure. You're not using standard percentage levels of salary in terms of delivering share awards was markets are super depressed.

And something that we've not seen in in in Europe, but I think Todd is is of being discussed, at least in the US is is a different approach in terms of looking at average chef, Bryce.

TM

Yeah, there's a couple of different methods that our clients are talking about. And we're consulting them with the kind of range from really simple to very complex.

And we very strongly believe you should say on the simple side, the two ways that people are simply handling this one is average share price, looking at

Two months, four months, six months of stock prices, instead of

Using like march 16 the low, the low point of the market as the as the grant point

That's one way. The second way like they're doing in Europe is completely disconnected.

From this year's market and say why don't we just rebrand shares at the same level as last year there again, there's a lot more complex ways of doing it, but we think those are the best ways to communicate to participants on how to do it.

MQ

The ones that that a couple of other things that I would just say, in addition, Todd is is Something that we're hearing conversation about is a different approach.

Perhaps to performance conditions on these plans.

So perhaps more use of, if it's appropriate more use of relative performance measures.

RTS are for example, and and also the recognition that you know in a in a complex governance environment.

This question around communicating with shareholders and institutional shareholders and in terms of making sure that these changes on executive pay meet government's requirements is going to place quite a strong emphasis on the whole areas investor relations.

DLowman

I agree. Just quickly, Todd, if you could wrap this part up what what should companies be doing right now in terms of thinking about monitoring the situation over the next couple of months.

TM

Yeah, so we talked about 30 days we talked about medium term. Now let's talk about the next six months, there should be four ways that

The REM coach should be monitoring what's going on. So I'm going to go through all four of those quickly. The first one is

You should be getting relevant information. So don't be distracted by the headlines and the Financial Times or The Wall Street Journal focus on your specific peer group and what's going on with your peer group also look at what the legislative impact.

Is going to be on your on your business down as you mentioned earlier.

Right now looks like executive pay could be kept in the US. If you receive stimulus money and there could be a cap on severance as well. So that's first, second is, you should have a workable realizable pay model.

To make sure you understand the efficacy of your plan third Monte Carlo simulations. What's the art of the possible around goal attainment and the last one.

Is monitoring your share pool as Mark mentioned all sorts of different grand strategy is going on, need to make sure you have enough shares to grant that you don't have to go back to shareholders too soon, so

That's it on the exact conference done, Becky.

DLowman

Thanks, both it's a it's, it is a complicated subject in in real time in regular times, let alone now so

This is one I think everyone's got to stay tuned on but but again I would go back to one of the main themes which is leaders need to lead by example we're going to come now to Salesforce rewards.

We will start with a poll and this is our last poll of the of the of the webcast today.

But which accidents have you taken or do you plan to take to manage sales force rewards and again this is a select all that apply question, you'll see that there's a consistency in the way we're asking the

Framing the answer is too soon to say we're still deliberating no changes expected as a result of coven 19 base salary free or base salary reductions.

Reduction and commission or bonuses modification to sales quotas performance targets reduction, the benefits and perks increase in base pay increase in commissions and incentive opportunities and we'll tabulate the results.

As I mentioned before, my colleague, Joseph DiMisa is going to be the one that that I put on the spot here and ask a series of questions and

Hopefully he will offer a lot of guidance to all in terms of how to think through this. This is an often forgotten part of the workforce. And yet, in today's environment.

In many respects it couldn't be more critical as companies are worried about loss of revenues and worried about the impact on their business. So let's see if we can tabulate the results that we've got so far.

And I can guess correctly the similar to the executive pay one we've got roughly 70% that say too soon to say we're still deliberating

But another 15% say we don't expect any changes as a result of coven 19 20% say they expect to do some modifications to sales quotas and performance targets which, as Joe as we go through this. My guess is these probably are not surprising answers to, you know,

JD

You know, I'm pleased to see very low numbers on base salary freeze and base salary reductions.

And I'll talk about that in a minute. So, um, Don, I think the The first thing I want to talk about is the immediate actions that somebody may take terms of their, their sales compensation programs to Salesforce, etc.

And so I have both. Do's and Don'ts to share with you. So the first don't I would say is, Don't overreact. Be very thoughtful in anything you do with sales.

And again, I'll point out the fact that 50 to 60% of their pay in many of your sales job roles comes in the form of incentive pay. So you have to be you have to be thoughtful.

And and I'll point out that we've seen circumstances like this before. Now, not on the the global level that we're seeing today, but certainly at a regional level, a geographic level. I'm thinking terms of earthquakes, floods, hurricanes, any sort of natural disaster, a military coup.

So an isolated areas we've seen the sales opportunity they say the sales force needing to shut down where you have sales reps that can earn a living. And so be careful. Your first interaction, mate, or your first thought may be to

To furlough employees or to lay off employees and I would advise you know that may ultimately be something to consider. But, but in the short term crisis, I would avoid that. And the point being is that when this thing does turn and it will turn. It's a short term crisis if you don't have enough sales resources you miss the opportunity that comes right after the crisis ends. So, in essence, your crisis last longer than the crisis itself. So, so be careful.

The second point I would make. And it was the point I just made on polling questions.

 

Be be careful with any sort of salary freezes or base salary reductions and remember a salary is only a percentage of somebody's total comp

So if you cut that you're actually giving them a double car.

I'm now in terms of what you should be doing.

You shouldn't be looking at any sort of short term uplifts you can do to your incentive compensation plan.

To help motivate individuals in your, on your sales team to help inspire them to help them stay focused. It can be on activities. It could be on revenue, it could be on

Moving deals to the funnel. But the point is is adding some sort of uplift on a short term basis to your plans and when I say short term. What we're typically recommending and seeing is, is about a one quarter period of time. So do it for 90 days and then evaluate

And then the last thing I'll say is constant communication. I mentioned that earlier, but specifically to different groups of the Salesforce Salesforce leaders Salesforce managers and Salesforce reps.

DLowman

OK, Joe, Thanks a lot. I wonder if you could just quickly run through this sort of, the magic that we have here for how we can think about sales compensation actions right now.

JD

Yeah, absolutely. Okay, so there are three immediate actions that you can take right now. The first action is to set up an incentive compensation relief for the purpose of this relief or is to set strategies in times of crisis for the South.

And so this this committee looks much like a deal review board. It may look much like a compensation a CEO, he center of excellence.

And again, the point is to set strategy to make decisions around what you're going to do for the Salesforce typically you'll see members include HR Sales operations. If you have a sales operations team finance and then sales leaders.

The second thing is you need to identify the affected channels the affected roles, the affected areas that might need assistance.

Ultimately you may decide it's the whole organization. But take a look at different groups and determine what you need to what you need to do.

If anything, I'm certain triggers that we're recommending and we have seen as a number one if you see a decrease in roughly 20 to 25% of the sales forecast a sales opportunity with a revenue that that's a trigger to consider some sort of action.

Secondly, or the second trigger would be a potential of 15 or 20% reduction in a sales rep target pay or target and say, all right, and then the third piece is carefully review all your policies and procedures.

In terms of who might be received any sort of compensation uplift or compensation really but you want to offer it to employees in good standing. You want to make sure that you're taking care of the people that have taken care of. And secondly, you want to set a timeline on what you're doing.

You don't want to put these things out in perpetuity. Where when when when the economy picks up the crisis ends the normal compensation kicks in. You also have these uplifting because your cost of sale will get very high.

And then lastly, determine the payback type of terms. So if somebody terminates after they've received some of these benefits from you yet. They haven't they haven't performed or having met the time constraints. Do you, do you want them to offset it or pay

So in the near term. What are the things specifically the ones you would recommend. I know there's a dizzying array of things that we could possibly do. What do you think should be the focus right now for people as they think about sales.COM. Okay, good.

Don I'm going to answer specifically for the sales comp plan, which are the things on this page.

But then we've also received a couple of questions in terms of overall from a relief perspective, so I'm going to try to address a couple of those questions after I hit this.

Okay, so there's actually no right or wrong strategy in terms of what you need to do for your organization really and Don made that point earlier.

There's not necessarily a best practice what you need to look at is, is what is going on in your organization, what is happening, how has it impacted

So there's a list of about 15 things on this, this piece of paper that that potentially we're seeing recommending you know indoor doing for

I'm going to point out for the most popular ones so lowering thresholds in a in a compensation plan you typically have three, you know, three measures or less primary, secondary and tertiary measure what we're recommending is if you have thresholds on those plans potentially lowering the threshold.

A threshold is a minimal accepted amount of performance that somebody has, in order to earn incentive compensation. So lower that and give them an opportunity to earn a little bit earlier.

The second thing is to lower excellence levels and excellence level is the, is the amount is the point at which you can earn additional dollars. Once you're over your target. So, lowering that to take care of your top performers.

Is it closely correlated to that are tied to that is, once they hit that lowered excellence level, increasing the amount of dollars they can earn over that that that excellence pay or that acceleration pay is key can give them some some additional motivation. And then the last thing is any sort of spot award spiff, whether it be cash or non cash that you can put out there for reps to motivate them.

Is also something that we would consider. I'm done, I'm going to just go to a couple of the questions so a couple of people actually have numerous questions. Asking, are there other short term relief methods.

So again, the things on this page have to do with the compensation Plan in general. Other things that we're seeing.

We're seeing companies extend the measurement period. So if you're on a monthly type of plan, A quarterly type of plan, we're seeing the runway being extended from a quarterly to a Bi annual or an annual plan giving reps more time to make up the differences in their targets that they, they're not getting.

Second thing is a non recoverable draws offering some dollars that are non recoverable to to the employee during this time of crisis we are seeing quote a relief being given on a short term basis. Um, we're seeing quota.

Probation along with the proliferation o compensation during those are, those are some things. Don't let me answer two more questions. I know we have to wrap

DLowman

Just if if you would just do one more, if you would. Okay, thanks.

JD

No problem. A couple people have asked about a specific sales comp webinar. Absolutely, yes. We will put one of those on we're planning it within a week to 10 days. So look. Look to receive an invite. And we can go into a lot of detail on this.

DLowman

Okay, thank you. And thank you to all the speakers we unfortunately do not have time remaining to get to questions. But we've logged the questions and we're actually we're producing a white paper on this subject, and we will send that white paper out and I promise you that we will answer in that white paper as many of the questions as we can.

That had been asked. There have been a number of really good ones coming in.

Man, I'm just going to ask you to answer one very quickly, if you would. There was a question that came in about clarifying what a red and blue teams, could you just take 30 seconds on that to describe what we mean by random routines.

AW

Sure. I think Mark, do you want to take that one that was on your financial services by your

MQ

Sure. So this is a process of dividing the workforce into two and creating 24 seven working either virtually or physically, if, if, for example, if it were in a call center.

To ensure the physical distancing can take place and making sure that the workforces spread in the activities, it delivers on the time but it it's using either a physical facility or an online services.

DLowman

Perfect. I just have a closing remark here. We've covered a lot of ground in some ways haven't covered everything that we'd love to because there's a lot to do.

But for things to remember here. We said employee well being, is paramount. It absolutely is. I think we all know that.

As you've heard repeatedly be balanced and thinking about now and the future because we know there is going to be a turnaround and it may happen sooner than than many people are predicting this is temporary.

And you've also heard repeatedly that leaders should lead by example. We've already seen instances of that.

Happening around the world and hopefully that will continue. We want to thank you for joining us today, a reminder that we have done. We've done a number of webinars.

Those are available on demand as well. This one day. We've got two more coming up in the next couple of days crisis proofing your account processes, creating effective learning experiences.

In a virtual world. And then we've added one and we encourage you to go to our website and sign up for this one, cultivating personal resistant resilient amid volatility.

That's, that's an interesting one. That will be on this Friday. So I want to thank you all for joining. There will be more information coming your way. I'll turn it over to my colleague Donna and let you know about more information on

DLehman

Her say that and thank you to our speakers and everyone who attended.

I know we're at the top of the hour would like to let you know you can get further information and our Korn Ferry com website such challenges slash coronavirus or you can take out your cameras on your iPhones right now or your other smartphones and take a picture of that QR code. It will take you right to that website where there is a lot of information.

Quick reminder that this session has been recorded, you will get a link to this webinar, and the slides. The meeting is now ended. Please stay safe and be well

DLowman

Thanks, everyone. Thank you very much.

Contact Korn Ferry today