Case Study: Remuneration Advice for a Transformation

The challenge : A major business group of a large publicly owned parent entity had reached a turning point. Its business model was changing and it needed to identify new revenue streams. The Board determined that the group required a significant management restructure. The long-term CEO was retiring, to be replaced by a new CEO with carriage of the transformation.

Business Transformation

The Board needed advice on the pay of the incoming CEO as well as the newly restructured team. It also wanted to assess the possibility of bringing the pay structure, which included unsustainable legacy elements, closer to current market practice.

The process : Once the CEO had been chosen, Egan Associates provided assistance in pay negotiations, including advice on an appropriate remuneration level and structure. This required consideration of the:

  • Organisations’ revenues, assets, employee numbers and other metrics;
  • Increasing complexity of the CEO’s role, especially in light of the difficulty of the transformation facing the organisation;
  • Pay parity between the new CEO and a new executive team;
  • Effect of legislation changes on the taxation of superannuation;
  • Economic setting;
  • Necessity of exercising restraint, not only due to the environment of scrutiny, but also due to the likelihood of the transformation requiring staff retrenchments at lower levels.

After the CEO’s appointment, an executive restructure was initiated. Egan Associates developed appropriate pay bands for the executive team using a work value approach. Considerations included the:

  • Knowledge and expertise required to meet the demands of the new executive roles; and
  • Structure of reward offered by similar companies while ensuring alignment with progressive milestones and planned outcomes over a three- to seven-year time frame.

Egan Associates also advised on the appropriate levels of remuneration for retained management following the restructure, considering the difficulty of the transformation, the need for a new reward strategy and its application over an extended time frame.

Throughout the process, Egan Associates provided support to the organisation’s remuneration committee, including the development of a plan for incremental increases over an extended extended period to ensure alignment between existing and new staff. Egan Associates built a calculator enabling the organisation to better understand the outcomes of modifying the remuneration structure. We also provided a framework for the proposed annual and long-term incentive plans and offered advice on annual KPIs and performance hurdles aligned to the transformation’s success.

The Outcome : The organisation was able to secure and retain the service of numerous experienced executives to implement the planned transformation.  A decision was reached on a modified long-term incentive scheme to ensure retention that would not disadvantage long-serving executives accustomed to a less rigorous reward program. Under its new leadership, the organisation has made significant progress in its transformation, meeting significant milestones.