Experts say executive search and compensation activity has exceeded expectations, but greater impact may be felt in 2021 budgets
Even as the budgets and business models of so many associations have fallen victim to COVID-19, board members are still willing to pay up for strong leadership.
“People are looking for talent,” compensation expert Charlie Quatt during the CEO Update LIVE: Compensation webcast on Nov. 17. “And when they find it, they’re making good offers.”
Executive search consultant Leslie Hortum of Spencer Stuart agreed.
“I have not had one client say, ‘Hey, do you think we can get a better deal on this candidate because of the pandemic?’” she said. “In fact, it’s been the opposite. ‘What is it going to take to get this person to make a move in the midst of the pandemic?’ has been more of the conversation.”
In response to questions from moderator Mark Graham, managing director of CEO Update, Hortum and Quatt said executive search activity and compensation trends have stabilized since the initial pandemic shock last spring.
Quatt’s business consulting firm, Quatt Associates, has done several real-time compensation surveys since the pandemic began, most recently in October. The latest results showed a more positive picture for executive compensation than he expected. But as usual, and particularly when it comes to incentive pay, trade association CEOs are faring better than those of professional societies.
By the numbers
Just 2% of trade associations responding to the Quatt survey reported cutting CEO base pay, he said, while 41% percent have frozen base pay and 56% reported increasing it. Among individual membership organizations, 5% were reducing chief executive base pay, 48% freezing it and 48% increasing it. (The numbers don’t add up to 100% because of rounding.)
“What we’re seeing is a much more positive outlook in terms of either base salary retention or increases than we had anticipated,” he said.
Some trade association CEOs are seeing even higher incentive compensation.
Among trades, 11% reported their CEOs would receive no bonuses and 26% reduced bonuses. But 56% of trade group CEOs were receiving normal incentive pay and 8% actually would get higher bonus pay.
“There are many reasons” why some are seeing higher bonuses, Quatt said. “It’s how they responded to COVID. It’s the value that members see in them.”
Among professional societies, one third reported eliminating bonuses, 28% reported reducing them, and 35% said they would continue at normal levels.
With the pandemic creating an epidemic of uncertainty, some organizations are shifting to quarterly reviews of executive performance and recalibration of bonus metrics, he said.
“There’s a real value in looking every quarter at the performance goals and make sure that they still make sense, particularly if the organization is being diverted from carrying out some things because of other things they have to do,” Quatt said.
Hortum said the pandemic has been an opportunity for executives to show their mettle.
“There are some (CEOs) who’ve just hunkered down and said, ‘Let me know when it’s over,’” she said. “And others who’ve said, ‘Gosh, what an opportunity for leadership.’ And they have stepped in and very proactively tried to manage their teams and their boards through this unprecedented time.
“So, what our clients are now asking us for is, ‘Is there a candidate who can demonstrate his or her track record of impacting change or leading through change? Because that’s what we need right now,’” Hortum said.
Equity and inclusion
The increased awareness this year of racial equity issues this year has had a major impact on executive recruiting, Hortum said.
“One other thing that has fundamentally changed or been enhanced and accelerated throughout all of this is the whole question of diversity, equity and inclusion,” she said. DE&I has gone from being an important goal to one of hiring organizations’ most important priorities, she said.
Spencer Stuart has long recognized the importance of diverse candidates, she said. But after discussions with one current client, the firm agreed to a different approach for its initial written presentation of candidates to the client.
“We’re going to send the materials blinded, so that there are no photographs and no names,” she said. “People will just be looking at the actual career experience of the candidates.”
After the search committee chooses a group of candidates to consider, Spencer Stuart will review the list to ensure adequate representation of women and minorities, she said.
Tough year ahead
Despite the stabilization of compensation this year, next year could be a different story, Quatt said. Many CEOs benefited from the fact that base and bonus pay for 2020 was budgeted before the pandemic hit. Boards may be more cautious going into the second year of the pandemic’s continuing impacts on industries and on in-person meetings.
“Budget issues may be more severe in 2021 than they are in 2020,” Quatt said. Boards “are worried more about revenues next year, they’re worried more about losing members.”
But employers are searching for ways to reward staff that go beyond pay, he said, pointing to a Nov. 14 article in The Washington Post.
“A lot of people have come around to thinking that they can do some things in compensation,” he said. “There was a very interesting article on how the pandemic is shifting workplace benefits—prepaid legal plans, IT help desks for kids (attending school remotely), expanding hospital coverage, mental health benefits, even help with divorces, access to telehealth platforms … giving employees time to be with their kids … and I thought, ‘Isn’t this wonderful?’”
“In some cases, (employers are) making arrangements to give employees access to these benefits at no cost to the company, but with a lower rate for the employee,” Quatt said.
Pay is up but people want flexibility
Job candidates for association C-suite seek more options to work away from office
Compensation levels for top association staff are rising, but so are expectations among job candidates to work remotely, two recruitment and compensation experts said during a CEO Update webinar on executive pay.
Recruiter Leslie Hortum of Spencer Stuart and compensation expert Charlie Quatt of Quatt Associates joined CEO Update Managing Director Mark Graham on Nov. 3 for an hour-long discussion on the compensation and recruitment outlook for association C-suite positions. One common theme: The COVID-19 pandemic has left a deep mark on the association landscape, with job candidates demanding more flexibility on remote work and less emphasis on incentive pay.
“We’re going to start seeing pressure for people to move incentive compensation to base salaries because they won’t trust any longer that the incentive compensation will be rewarded,” Quatt said.
That deemphasis on incentive pay comes after nearly two years of associations missing performance marks because of the economic headaches created by the pandemic. At the same time, the disaster had caused many workers to reevaluate their career priorities, leading to employee churn at organizations at all levels.
“People are leaving (their jobs) because this has been a time of making interesting choices about their lives: Where and how they spend their time, where they want to live, what kind of flexibility they want to have,” Hortum said. “There is an awful lot of churn. We’re turning work down all the time because we cannot keep up with demand for our services.”
Executive compensation is rising because demand for talent is high and employees have a lot of leverage at the moment, Quatt said. At the same time, women and people of color are pushing to ensure they are not paid less than the executives who preceded them. The association C-suite has historically been very white and very male.
Organizations “are being asked to invest in two ways,” Quatt said. “They’re being asked to invest in keeping their talent and they’re also being asked to invest in making sure that people are accurately paid. And both of those can cost money.”
Many associations have boosted their diversity, equity and inclusion efforts in recent years, especially since the 2020 Black Lives Matter protests sparked by the killing of George Floyd by Minneapolis police officers. That focus has carried over to CEO-level job searches, with search committees demanding a demonstrable history of action, according to Hortum.
“What search committees are asking candidates is not just how do you feel about it, but what have you done about it?” she said. “How have you shifted the makeup of your board to be more inclusive? How diverse is your senior leadership team? How about one level below that? They’re getting very granular and specific: not just do you think this is a good idea, but what have you done to impact the results?”
Work away from work
Compensation is important to job candidates, but so is an organization’s culture and mission, according to Quatt. Still, the most in-demand job perk at the moment is the ability to work remotely.
“We’re finding that the No. 1 issue is flexibility,” Quatt said. “People will accept more readily that they be at work a full week if they’re able to balance it with the personal schedules they have.”
“When people know that there’s a certain amount of flexibility, and this goes into customization of the compensation plan, that can go a long way in letting people fit their personal lives and preferences into the fact that they’re being required to come to work,” he added.
One example Quatt cited was a client that started paying its employees a monthly stipend to offset the cost of driving to work instead of using public transportation. “In other words, we may start seeing people actually getting money for coming to work on a regular basis and not getting it if they don’t,” he said.
One benefit of flexibility is associations can draw on a much larger pool of job candidates for top positions, according to Hortum. The downside, particularly for CEOs, is how do executives build a workplace culture if they rarely see their employees in person?
“A lot of people who fail in their jobs don’t fail because they’re not smart, hardworking people. They fail because it’s a bad culture fit,” Hortum said. “And so driving a culture that that is about inclusion and engagement and people feeling that they were aligned in the mission is really important. So how do we do that if people aren’t in the office?”
Still, there is no denying the popularity of the perk in attracting talent, she noted.
“What I have heard anecdotally is that those who are mandating back-to-office full time, people don’t want it, they’re not ready for it,” Hortum said. “Will we all feel differently a year from now? I don’t know, but right now, the mandate idea is not playing very well.”