What is the Role of an Executive Compensation Consultant?

If there’s one thing you need to get right these days, it’s executive compensation. To guide your organization through the current – and still evolving – business environment, you need the right leadership. And to get that right, you can’t fool around: you likely need outside help in the form of compensation experts who can align such pay with your organization’s business objectives. These people know the subject matter inside and out. But just what is the role of an executive compensation consultant? Read on for that and more.

What is Executive Compensation?

Also known as executive pay, executive compensation is remuneration expressly crafted for an organization’s top leadership that is in alignment with the company’s goals. Such compensation comprises both financial and non-financial benefits in exchange for the executive’s membership and performance.

The components of such pay usually include base salary, short- and long-term incentives, benefits, perks, and any severance or change-in-leadership payments.

What are Executive Compensation Consultants?

Experts in the crafting and implementation of compensation plans, these compensation consultants aim to put in place the right incentives for the employee behavior desired. They also apprise organizations of compensation trends and other issues associated with employee compensation.

Who Do Executive Compensation Consultants Work With?

Such consultants usually work with human resources in the design and management of such pay, often called incentive plans.

How Do They Make Their Determinations?

Such consultants usually get input from investors and board members when making their key decisions, since a company’s executives are major stakeholders in a company’s success.

Do I Need to Hire an Executive Compensation Consultants?

We’ve made the case that you most likely should get outside help, but the following are additional reasons why you should mull enlisting a consultant:

  • You don’t have time. If that’s you, it’s okay to admit it. And it’s best to hand this important task off to someone outside your organization than to rush through it in house. The consultant’s sole job is to home in your issues, without distraction, while you continue putting out fires and doing what you do.
  • They have the experience. While not all executive compensation consulting firms are equal, such consultants have a breadth of experience attained from servicing a variety of disparate clients. They can get right to your needs without any learning as they go.
  • They’re impartial. These consultants can take a clear-eyed approach to your needs with the objectivity needed to meet them. You don’t want any bias that may come from internal teams creeping in. But you also don’t want a consultant that employs a one-size-fits-all solution.
  • The cost of failure. It’s not true, of course, that every company that tries to figure out their own executive compensation plan is a failure. But taking on the job yourself so is also a huge risk. In the worst-case scenario, your very company could be at stake if it can’t recruit the right top talent. At the very least, your reputation and credibility could take a big hit.

Now that you know the role of an executive compensation consultant and why you should hire one, you can proceed with confidence knowing what’s necessary to put the leadership in place to navigate through the current societal and economic tumult. Indeed, the ongoing pandemic has resulted in employees’ taking a harder look at where they want to work. So, you need to enlist the help of a consultant who is plugged into that dynamic. We recommend the firm Mercer for its breadth of experience and expertise.


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