Crisis Response - 2020 Compensation Considerations

Aligning Compensation In A Changing Market

We are here to support our friends and clients as you navigate and adjust business practices during this evolving situation. Below are some considerations for adapting compensation plans in light of the current environment. Please contact us with any questions and join us for our webcast on April 1, 2020* (no joke).

The current environment provides family offices and family business enterprises with a unique opportunity to cement strong, enduring relationships with their teams as they respond to today’s challenging environment. By making adjustments to compensation plans and rewarding teams for actions that are in the best interest of the family, navigating through and out of the current economic/market disruption, families have a chance to deepen the alignment with their teams.

Crisis is a continuity and resilience stress test. For some organizations, the current global health crisis is a test of the people, structure, and strategy that they have designed and employed. For others, this situation will highlight that aligned teams, more structure, and a refreshed strategy is an overwhelming need.

Key Thoughts

Continuity of key staff is critical – especially in crisis response and recovery

• Communication is critical – it is difficult to over-communicate

• Acknowledge the list of unknowns 

  • If you know you want your employees to stay, that needs to be communicated – both verbally and through your compensation plans and actions

• Incentive plans work – so make sure you are incenting the right behaviors 

  • Evaluate 2020 incentive plans 

  • Consider how performance metrics were established

  • Identify where metrics need to be adjusted or plans re-defined entirely to reflect the current market

  • Redefine goals so prior targets are not a distraction

First Steps

There is typically nowhere to “hide” in a crisis. This translates to how and not if the current disruption will impact compensation plans and decisions. As the dust settles, consider where existing incentive plan metrics are unlikely to pay out, which could result in teams feeling like they are being “punished” for things beyond their control. Here again, communication is critical – let teams know that you understand the situation, are reviewing compensation plans closely, and that changes will be implemented as appropriate.