This is part of NRN’s Executive Salary Survey special report, in partnership with HVS Executive Search. For the full report, see the Nov. 21 issue of Nation’s Restaurant News. The report is also available for purchase at HVS.
Read moreabout the Executive Salary Survey and the methodology behind the numbers.
The findings of our 2011 Chain Restaurant Executive Compensation Study indicate that compensation is on the rise, and the fight for senior-level talent is the fiercest it’s been in decades.
While our biennial report covers mostly compensation data, I also spent time conducting follow-up interviews with survey participants and our advisory board team to understand not only what executives are paid, but the deeper organizational strategies surrounding the attraction and retention of high-performing talent. I culled a lot of interesting responses and found that as macroeconomic trends continue to stabilize, top talent is in a reset mode, weighing long-term opportunity with their current organization against exciting new opportunities emerging within the chain-restaurant industry. To stay competitive, restaurant organizations must look beyond the data.
Total cash compensation: Of the 15 senior-level executive positions reviewed, almost every position had healthy total cash compensation increases compared to 2009. I attribute this to a more optimistic industry outlook enabling organizations to increase base salaries and allow for executives to more realistically meet and/or exceed annual bonus metrics.
Long-term incentive/equity: Surprising to me, however, was the finding that, in both our public and private company respondents, few provided annual long-term grants to their senior leadership team. This is perplexing, as I have found time and again employees who own a stake in their company’s success are more proactive and innovative, and strive for the efficiencies that boost earnings and growth. It is my strong belief that organizations prohibiting long-term incentive/equity opportunities are going have an incredibly tough time on the human capital front.
During the course of my follow-up interviews with survey participants, which included leading human resources executives, chief executives and owners of restaurant companies, two predominant themes surfaced pertaining to compensation philosophy and succession planning.
Compensation philosophy: While most companies purport to have an organizational compensation philosophy, I found that many companies don’t take full advantage of such a program’s potential. A well-crafted compensation philosophy will provide an organization with a roadmap supporting the company’s overall performance management initiative, including the purpose/values statement and short- and long-term business objectives. Too many restaurant companies continue to execute on boilerplate programs comprised of words that have no substance. Here is one example:
“Our philosophy in establishing the compensation policy for our executive officers and other employees is to create a structure designed to attract and retain highly skilled individuals by establishing salaries, benefits and incentive compensation which compare favorably with those for similar positions in the geographic area and other companies within the chain restaurant industry.”
Believe it or not, that statement was drafted by a public restaurant company. If you want an example of organizations that do it right, review the stated initiatives from Domino’s Pizza and McDonald’s, as found on their websites.
Succession planning: Formal succession planning will allow an organization to grow leaders and ensure continuity for the future. Too many companies within the restaurant space think they have an effective program in place. Unfortunately, the reality is that most succession-planning initiatives are extremely weak in structure.
A concrete program has to include extensive training and a set of learning experiences designed to enhance executives’ applied skills and competencies. When executed correctly, the program will enable the best and the brightest to be deployed in a variety of positions and competencies, as well as provide for exciting career progression opportunities. As an executive recruiter, I have found that there are not enough executives within the restaurant space exhibiting a diversified skill set, proving that most succession-plan programs are flawed. As this problem is only intensifying, I will be embarking on a more formal study surrounding these initiatives. Stay tuned.
David Mansbach is partner, North America, for HVS Executive Search, specializing in retained executive search, compensation consulting and performance management for the restaurant and hotel industries. He is also an investor in Growth-Point Partners, an investment firm specializing in early-stage restaurant companies, including Chop’t Creative Salad. David is a frequent lecturer on issues relating to executive selection, pay-for-performance and performance-management initiatives.