Compensation Topics San Jose State University Business 158

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Compensation TopicsSan Jose State
UniversityBusiness 158

• Name of Presenter
• Maria L. Rodriguez
• Director Global Compensation
• Date May 3, 2007

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Agenda

• VeriSign Background
• Careers in Compensation and Benefits
• Traditional Compensation Structure
• Design principles
• Role of job evaluation and salary surveys in
  traditional compensation structure
• Challenges leading to traditional compensation
  structures
• Compensation Metrics
• Performance Management - Implications on
  Compensation

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VeriSign

• VeriSign Inc (NASDAQ VRSN) operates intelligent
  infrastructure services that enable and protect
  billions of interactions every day across the
  worlds voice and data networks. 
• 2005 - 1.6B Revenue 4K headcount
• Every day, 18 billion Internet interactions
  processed and over 100 million phone calls
  supported.
• We provide the services that help over 3,000
  enterprises and 500,000 Web sites to operate
  securely, reliably, and efficiently.
• VeriSign is a global enterprise with offices
  throughout the Asia-Pacific region, Europe, Latin
  America, and North America

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Careers in Compensation and Benefits
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Careers in Compensation and Benefits
Finance
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Skills and Talents
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• Traditional Salary Structures

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Support The Business Behaviors For Success
Strategic Imperative
External Talent
Organization Design, Agility
Opportunistic Resources
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Design Questions to ask

• Strategy
• What is the goal?
• What talent is required to achieve our goals?
• How do titles and scope of our management impact
  recruitment and retention?
• Structure
• What are the competitive practices?
• How is the work managed? Which levels focus on
  Operations and on driving the Strategy?
• What is the impact of job structures on an
  organizations agility?
• Communication and the speed and flow of
  information
• Decision making structure
• Decentralized vs. centralized
• Hierarchical vs. a flat organization

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Titling Strategy - Questions needing answers

• Culture
• Is the organization egalitarian or are hierarchy
  and titles an integral part of the culture?
• Reward System
• How is behavior shaped by the goals, programs?
• Does the company want its people to be motivated
  by extrinsic rewards such as pay and job
  structure?
• How do rewards linked to job structure impact
  interest in promotions?

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Philosophy and Principles Guides Decisions

• Philosophy
• To ensure we attract and retain talented, highly
  motivated employees, we provides competitive
  total rewards programs that allow employees
  worldwide to partner in our success, as
  appropriate.
• Principles
• We share our success with our employees.
• We offer attractive pay, total compensation, and
  opportunities based upon the practices for our
  industry and/or local labor markets in which we
  compete.
• We provide a work environment including the
  tools, training and relevant information that
  supports a high level of personal and
  organizational productivity.
• We work together as individuals, managers and
  teams to define performance expectations, and we
  hold ourselves accountable for the objectives we
  have set.
• We recognize and reward results and commitment.
  We tie incentives to innovation and producing
  quality results quickly.
• We offer benefits that are competitive based on
  the local environment, are flexible, cost
  effective, and acknowledge the range of
  individual needs.
• We offer or participate in programs, which allow
  employees to effectively plan for and manage
  their financial futures.
• We communicate the goals, features,
  opportunities, and value of our programs..

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Approach Total Rewards
Winning Company
Great People
Dynamic Environment

• Attracts and retains talented, highly motivated
  individuals

Cultivates an energizing environment that
instills a sense of pride and winning spirit
Inspires employees to contribute at peak
performance and share in the success of this
winning company
Benefits
Compensation
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Total Rewards

• Total Rewards vary by country according to market
  and regulatory practices

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Components and Purpose
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Job Evaluation - Role

• Will be linked to your strategy, structure,
  culture and rewards
• Market
• External market is the driver
• Internal evaluation system (Point Factor, etc.)
• Internal value set is the driver
• Industry competitive factors
• Influence how you approach job evaluation
• Resources to support
• Headcount
• Line Management buy-in and participation

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Salary Structure Models Support The Business

• Hierarchical
• Business Model values hierarchy, decision making
  roles
• Resources may be abundant, specialized
• Business life cycle and processes can influence
• Longer product, service life cycles
• Flat
• Resources need to be nimble (cross-trained/general
  ist) and mobile
• Decision making typically pushed down
  empowerment
• Communication model supports decision making
• Business life cycle and process can influence
• Highly competitive environment

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Salary structures
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Define The Competitive Labor Market

• VeriSigns labor market competitors include those
  organizations against whom we compete for
  customers. This group also includes other local,
  regional or national employers who hire employees
  with the same skills and and experience VeriSign
  requires.

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60th percentile

• VeriSigns compensation policies are linked to
  the 60th percentile of the competitive labor
  market.
• This means we provide base salary opportunities
  that are above 60 percent of our labor market
  competitors.
• Setting pay at this level
• differentiates VeriSign in the market place
• is a significant investment that VeriSign makes
  in order to attract and retain experienced,
  motivated, high performing employees
• VeriSign will position pay above the 60 where
  required due to market conditions, e.g. India

The highest payer in the market
100th percentile
VeriSigns strategy
60th percentile
50th percentile
Typical pay The middle of the market
Below 75 of the market
25th percentile
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Example Of Lead/Lead Market Position
January 2006 FY2006 Salary ranges published
December 2006 FY2006 Salary ranges expire
Company Mid-Points Lead Market
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Company Mid-Points Match The Market
External Market
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Rigorous market analysis
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The Job Foundation For Compensation
Survey job descriptions and job levels facilitate
accurate matching
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Market Analysis and Range Development

• Every job has a salary range
• Salary data aged by country
• Midpoints of salary range and stock level
  guidelines are based on the market target
• Range spreads determine the minimum and maximum
  of the range
• Salary ranges move up or down based on market
  movement

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Behind the scenes
Output
Input
Analysis
Research
VeriSign Job Content(Mgrs.. Provide)
Market Reference Points (by job)
Job A 63,500 Job B 39,200 Job C 47,100 Job
D 32,000
Valid Compensation Databases

B D
C
A
Competitive Market Job Content
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3
4
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Job Level
Specific Jobs Assigned to Levels
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U.S. Geographic differentials
Olympia
Kansas City
Mountain View
Northern Virginia
Savannah

• Definition Percentage differences in pay levels
  based on location

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Jobs and the Market Reference Point

• Each job level has an MRP and a grade available
  for managers in Web Hire
• Grades determine bonus and stock targets

Product Manager
Project Manager III
MRP Grades
Web Developer III
Manager, Research
Corporate Com. Spec. II
Marketing Manager II
Accounting Supervisor
JOBS

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2
3
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• Compensation Metrics

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Compensation Metrics - Examples

• Measure objectives of programs
• External Compa-ratio (Position to Market) vs.
  Target market position
• Salary increase budget actual to budget target
• Salary percent increase rate by performance
  rating
• Salary increase by performance rating
  distribution
• High 10 8
• Core 85 4
• Low 5 0
• Internal Compa-ratio e.g. by performance
  rating, by job group
• Percent of bonus payment by performance rating
  and compared to target, e.g.
• High Funded at 110 of target Actual bonus paid
  105 of target
• Cost of Payroll and programs
• E.g. total payroll, total bonus cost, stock
  burn-rate and overhang
• Turnover
• Profile of employees terminating, e.g. high
  performance leaving

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• Performance Management and Compensation

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Individual performance measurements

• Criteria for levels of performance
• Behaviors which define the performance ratings,
  e.g. High, Core, Low
• What gets done
• Ability to deliver at required level of
  performance The job description
• Goal achievement
• How it gets done
• Behaviors required for success, e.g.
• Ability to influence
• Ability to build effective relationships
• Supports values
• Respect
• Accountability

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Performance Plan Bonus Incentive

• What gets measured gets done..
• Goals agreed to
• Specific
• Measurable
• Achievable
• Realistic
• Time bound
• Measurements
• Corporate and Business Unit results fund the
  bonus budget
• Individual Results Goals
• Reward
• Annual bonus tied to performance

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Budget For Pay for Performance
Annual Increase Matrix Example
Consider population distribution
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Pay For Performance Distinguish For It
What behavior does this result shape?
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QA
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Thank You