Engaging Executives in Their Long-Term Incentives

Transcription

1 Engaging Executives in Their Long-Term Incentives Stephen Dudak, CCP Group Leader, Executive Compensation, H. J. Heinz Company Scot Marcotte, CEBS Managing Director, Talent and HR Solutions, Buck Consultants

2 What Do We Mean by Engagement? An outcome a # of key factors The discretionary effort an employee is willing to contribute Organizational alignment with Culture desired vs. gap (as evidenced in behaviors) Business model, operating philosophy, strategy and goals Priority initiatives and programs Supported by a strong EVP, for more satisfied and productive workers, whose efforts drive success and shareholder value

3 Many Reasons for Concern on Engagement Average engagement has dropped by 4% from 2009 Only 29% are actively engaged in their jobs (BlessingWhite 2010) Just 20% of workers are fully engaged in their work (Towers Watson 2011) 45% are satisfied with their jobs (Conference Board 2011) 54% are ready to jump (Herman Group 2010) One-third plan to look for new jobs; 48% cite loss of trust and 46% cite lack of transparent communication (Deloitte 2010) 84% of highly engaged feel they affect product quality vs. 31% of non 46% hadn t taken all their vacation: fear, overwork (Right Management) 65% of Fortune 100 executives are concerned about turnover, mistrust

4 Engagement: A Compelling EVP is a Two-Way Street The Employee Value Proposition (EVP) It s the handshake deal between an executive and employer the value executives get in return for their contributions and performance An effective EVP clearly articulates what the organization expects from executives and what employees can expect in return The key to defining value is recognizing it s what the executive defines as value, embracing the possibilities, and making it uniquely yours A strong EVP enhances the ability to attract, retain and motivate the high caliber people needed to achieve business objectives it engages

5 Engaging an Audience of One Old Model Accommodate them Focus on the activity Hit them once a year at plan payouts/allocations Wait for them to do something The portal will cover what they need One size fits all New Model Engage them Focus on the outcome Create an ongoing dialogue with push & pull Motivate actions through predictive analytics Right media at the right time An audience of one Why Engagement = Loyalty Outcomes drive results Continuously influence behaviors If we don t encourage, they won t act Executives engage through different channels Executives have unique motivators

6 Getting to Know Heinz v v 35,000 Employees Globally Revenue approaching $11 billion

7 In the Beginning Heinz s journey began with a need to: Communicate total rewards value more timely and frequently Retain key talent through a spinoff Provide ready access to the total value of their employment Elimnate annual paper statements HeinzTotalCompensation captured data from compensation, equity and benefit program sources LTI plan consisted of mainly stock options

8 War for Talent Impacts Retention Business results improve HOWEVER! Turnover spikes Heinz becomes a target for industry talent Executives are skeptical about their total rewards value They haven t digested the recent changes Disappointed by low incentive payouts in previous years Incentive Plans (STI and LTI) Plans aren t delivering intended values Measures are questioned

9 Strategy: Re-Package Executive Pay Rebuilding Value with Plan Design and Communication Design improvements made to STI and LTI plans Briefing sessions conducted globally Increased transparency What is my target for each plan? What are the metrics and how are we doing? How can I impact each metric? Increased understanding of the value of each pay element Our goal: Enhance retention, motivation and talent acquisition

10 Portfolio Approach Executive Bands 8-14 Incentive component is a % of salary Band AIP Target RSU Target LTPP Target Option Target EVP 100.0% 80.0% 85.0% 85.0% CEO 220.0% 120.0% 275.0% 200.0% Target Award can be adjusted +25% to -100% Disclosed in Proxy DEF-14a Multitude of different measures All awards are prorated monthly for new hires and promotions to engage Executives as quickly as possible

11 Incentive Programs AIP (Annual Incentive Plan measured at BU level) EPS (OI for BUs) and OFCF weighted 50% each with a NSV modifier LTI Programs (Measured at Corporate Level) Options RSU 4-year time based vesting, 25% annually 7-year life 1-year OI performance trigger (award forfeits if not achieved) 4-year vesting, 25% annually Dividends are accrued and paid at vesting LTPP (LTI cash plan) TSR and ROIC each weighted 50% of award Award paid in cash as long as SOG is met otherwise Restricted Shares

12 Solution: Web Site Enhancements Expanded website to illustrate transparency and wealthbuilding power of Heinz incentive plans: LTI section added shows equity grants and estimates dividend income Interactive on-line calculators show metrics, performance and potential results for STI and LTI programs SERP valuation added to Retirement Section Total wealth accumulation page shows what is on-thetable if participant voluntarily leaves Heinz PDF statement to facilitate working with financial planners Perquisite values and stock ownership guideline added Created ExecutiveConnection mailbox

13 Our Results Best business performance in history of company Ranked #1 in total shareholder value among our industry peers Heinz is winning the war for talent Website users are satisfied with the content Utilization is high and growing steadily Continue to enhance LTI programs Shuffled pay mix by reducing STI and increasing LTI, but also creating a portfolio approach to LTI

14 Heinz s View Expanded Access to personalized Career, Health and Wealth data provided an opportunity to offer more focused & targeted messaging A portal approach meant one place for executives to access all Heinz and vendor content, from home and at work The portal provided a chance to streamline and strategically position vendor communication Provide non-us based Executives access to the same interactive data

15 HeinzTotalComp.com to MyHeinzPlace.com 2009: Introduction of MyHeinzPlace MyCareer MyHealth MyWealth

16 Prompting Executives to Action Key Elements Results Individualized action items with calendaring SSO to third parties Content management system Single point of entry Provide Monthly/Quarterly Incentive Updates Created ongoing dialogue with executives Heinz gets credit for programs offered Reduced vendor costs Less executive turnover

17 Linking Executives to Business Results All Heinz incentive plans are designed to connect executives to the business Strategy was to use low tech to drive high tech behaviors All communications provide basic information and drive employees to website for more information Resulted in nearly a 40% increase in MHP hits following distribution

18 Linking Executives to Business Results v Launched Canadian website to all salaried employees v AIP Worksheet going green for 2011-offered only in PDF format v Simple and easy to use v Continues to drive employees to My Heinz Place for more robust calculator

19 Introducing a New Heinz App: My Health A Companion to the My Heinz Place portal An app focused on health and benefits Provides instant, on-the-go mobile access to employee benefits information Engaging and easy-to-use platform A new communication channel to directly connect to employees Communicate what s new/changing with benefits Communicate wellness incentives and initiatives Provide point of purchase tools

20 Future Direction Continued drive to expand Deep integration with SAP self service tools Downloadable apps to drive engagement everywhere Full executive lifecycle job candidate to retirement functionality Opt-in communication options for increased targeted messaging (MHP, , text to handheld) More push than pull Full vendor message coordination through My Heinz Place engine Global consistency in user experience

21 Questions? Stephen Dudak, CCP Group Leader, Executive Compensation, H. J. Heinz Company (412) Scot Marcotte, CEBS Managing Director, Talent and HR Solutions, Buck Consultants (773)