Salary Benchmarking for Senior Leadership Roles in Consumer Goods
Prevent Offer Rejection by Knowing What to Offer the Best Candidate
You’ve started a leadership hiring process, but you haven’t been able to make a hire yet. You’ve made a couple of offers, but to no avail. The candidates appeared enthusiastic, but rejected the offers you made. Why? And how do you ensure your next offer doesn’t receive the same treatment?
First, let us assure you that there are always candidates for senior-level roles. The best of these are usually passive candidates, who need to be approached strategically.
Let’s assume that you managed to engage one or two of these.
Throughout the interview process the candidate’s enthusiasm for the role seemed only to grow. In both cases, you were certain you had found your new business leader. You made the offer, but it was rejected. Why were you not able to land your star candidate?
Ultimately, the offer you made wasn’t appealing enough. “But we researched the market!” we hear you say. “We offered in line with what other similar roles are offering.” But did you really?
Welcome to the complexity of salary benchmarking
Salary benchmarking is a process that you must undertake. It helps you to pitch your offer at the right level. However, compensation is a complex calculation, and growing in complexity every year.
Candidates’ priorities are evolving. Hiring companies are being increasingly innovative in designing compensation packages to meet candidate needs, wants, and ambition. If you expect an offer to be accepted because your salary is above your competitor’s, you will probably be disappointed by the candidate’s response.
Move from salary benchmarking to compensation benchmarking
It’s time to stop talking about salary or pay benchmarking and start talking about compensation benchmarking.
Across the board, we are seeing that candidates are increasingly focused on other elements in their compensation packages. If you don’t consider these when constructing the offer to make, then you are likely to be turned down.
So, what are today’s highest-quality candidates for senior FMCG roles seeking in their compensation packages?
We’ve identified five key financial deliverables in a compensation package:
- Long-term investment plan (LTIP)
- Performance-related bonuses
- Executive share options
- Sign-on bonus
The relative importance of these compensation elements will depend upon individual preferences, but if you don’t get it right, your offer is likely to be rejected.
Salary is one of the most important elements to attract and retain the best and most talented executives in the FMCG industry. When determining salary, you should consider:
- Competitors’ salary – the estimated salary that reflects what other executives in each geographical area or industry are earning
- Salary benchmark – a calculation of what an individual should be paid based on his or her performance and skillset, which can be used as a reference point for negotiating salaries
- Market value – what an individual would be worth in the labour market if he or she were free to find employment elsewhere without any restrictions
- Personal value – how much an individual feels he or she should be paid based on their own skillset and job performance
A word of warning: salary is also the most difficult element of compensation to control because it is so prone to market forces.
A long-term investment plan is designed to reward executives for fulfilling performance conditions under the plan and contributing to increasing shareholder value. This performance period usually lasts between three and five years.
Rewards under the plan might be made as: ‘cliff vesting’, where the rewards are paid at a specific time in the future; or ‘graduated vesting’, where the rewards are paid out over a specific period.
An LTIP is a great tool to encourage longevity and retention, as well as motivating performance. From the executive’s perspective, it locks in rewards for performance achieved and shows confidence in them from the outset.
3. Performance-related bonuses
The purpose of these bonuses is to attract and retain top talent, but also to motivate them to work harder if they feel like they are not being compensated sufficiently for their efforts. This kind of compensation is more common in companies with volatile stock prices.
Performance-related bonuses are becoming increasingly popular for executives. The bonus is calculated on the pre-agreed metrics, and they are paid out more flexibly than LTIP rewards.
These bonuses are different than LTIPs because they usually come with more strings attached, and can often be revoked or changed by companies at any time during or after a financial year.
4. Executive share options
Executive share options are a form of equity compensation that allows executives to purchase shares in their company at reduced prices. The main difference between an executive share option and an LTIP is the vesting period. When an executive receives share options, they can usually be vested much sooner than rewards under an LTIP.
For executives, share options offer greater flexibility as well as incentivisation to perform well and help grow the company. They are also often viewed as less risky than an LTIP.
5. Sign-on bonus
Sign-on bonuses are another element of compensation that are becoming more popular, though some companies offer sign-on bonuses as standard. Others offer them selectively, only to executives with critical skills or expertise that are hard to find in the market.
There is no set formula for sign-on bonuses. What you might offer depends upon your sector, your need, and the candidate’s experience and skillset. A sign-on bonus is agreed during the negotiation of compensation but is usually paid after several months or a year in office.
How do you perform comprehensive compensation benchmarking?
The likelihood that an employee will leave their current employer increases as the disparity between their current compensation package and that of a potential new employer’s offer increases.
There are many ways to perform compensation benchmarking, but a comprehensive compensation benchmark typically includes information about base salary, total cash compensation, bonuses, financial benefits as detailed above, and other, non-financial and in-kind benefits.
To perform comprehensive benchmarking requires many strategies. It is a laborious and detailed task, requiring you to assess salaries and benefit packages offered in your industry and location.
You’ll need to examine local job listings (of which there may be few, especially in the most senior executive positions); use LinkedIn’s job listings to uncover average salaries; survey companies in your area and industry to learn what their compensation packages are (would you tell a competitor?); and conduct online research, too.
Make compensation packages a non-issue in offer rejections
There are many reasons why a candidate may reject your offer, but research shows that the highest-ranked reason is that they are not happy with the compensation and benefits you offer. Yet discovering what is needed to make an offer that cannot be refused is extremely difficult as a one-time operation.
At Lime Talent, we are in constant communication with our clients – many of them blue chip companies in consumer goods or challenger brands – and so we have our finger on the pulse when it comes to compensation in the market. This means we are continuously updated with details of compensation packages, and this allows us to build a comprehensive picture of the current ‘state of play’.
Of course, we are also in constant touch with candidates. This gives us a unique insight to the current thinking of those who are seeking new challenges and those who are not yet might find your opportunity appealing.
Additionally, our consulting role means that we can advise both client and candidate in the process of determining what is a fair and reasonable compensation to offer and accept. Consequently, the success rate of offers accepted by candidates we present is high, as well as the longevity of those candidates in their new roles.
If you’re thinking of hiring someone new and you’d like to receive a comprehensive overview of salary and compensation benchmarking for a specific vacancy, fill out the contact form and we will be in touch.