Case Study: Comp Committee Risk Assessment – High Tech (Software)

The Issue

A small but rapidly growing software company had gone public three years prior.  While  their stock price was at a historical high, this company was rated by third party institutions as being moderately risky because of its compensation practices. While the board’s Compensation Committee regularly performed oversight of the executive compensation program, the sales population accounted for almost 70% of total compensation spend but the sales compensation plans had never been reviewed. The Compensation Committee  was interested in understanding the risk associated with the organizations’ sales compensation program, mitigating that risk, and ensuring optimal sales results were being achieved

The Solution

We created a quick and hard-hitting risk assessment framework that provided a definitive risk scorecard and helped the Compensation Committee fulfill its oversight function. We focused both on the total amount of pay delivered as well as how the pay program’s design delivered these compensation dollars. The work included global market pricing for dozens of roles, pay-for-performance analytics to provide clarity on current plan performance, and a comprehensive audit of current plan designs compared to high tech software market best practices.

The Impact

The evaluation identified areas of moderate to high cost/performance risks, as well as areas that were performing in line with market practices.  The work helped justify pockets of high pay for critical roles, particularly in new international markets. It also identified an essential gap where performance goals were used ineffectively and inconsistently. Top performers were not always the best paid, and overall Compensation Cost of Selling was out-of-alignment to market. Our assessment pointed the way to creating an enhanced sales compensation program.