Not for Profit Property Sector

Their challenge

The client was on a journey to diversify its portfolio of activities and take a more commercial focus to operations. With an eye on the future, the Remuneration Committee were keen to explore ways to ensure that the organisation was both attractive to future hires and factored in an element of value creation to the compensation package. Although a not-for profit organisation, it operated within a mixed economy, competing for talent in both the not for profit as well as commercial. Sector. There were no ‘shareholders’ as per the traditional sense - any surplus was reinvested. As such Share-based remuneration, which is common in many executive reward structures, was not possible.

With Executive Compensation rightly scrutinised in the media for often being excessive and incongruent with the average employee package, was vitally important that the approach to compensation of the Executive Team balanced many different interests and considerations, including employees and key stakeholders, and ensure that the approach motivated the team to deliver the long term vision as well as balancing affordability, sustainability and prudence. The initial consideration was to develop an Long term incentive plan, however it was recognised that effective incentive plans cannot be designed in isolation and a wider total reward context was required to ensure that the scheme had a clear purpose, could be clearly explained and fit with overall reward principles for the organisation.

Our solution

In order to determine if an LTIP was the right solution, we conducted interviews with key stakeholders of the Executive Team and Board to understand current performance and reward arrangements, gain clarity on how they worked in practice and explore aspirations for the future. This enabled us to determine clear reward principles to underpin the design of any variable pay scheme. We also undertook analysis of the market to highlight insights on typical Executive LTIP pay practice in both the not for profit and commercial sectors, highlighting a number of peer organisations.

There was overall consensus across the Executive Team and Remuneration Committee on the important considerations that were needed to ensure any incentive plan that was introduced would fit culturally and not drive unintended consequences. Based on the discussions and analysis, recommendations were developed to create a remuneration philosophy in the first instance to underpin all future reward decisions for the Executive Team, as well as high level potential designs for the chosen Variable pay option.

The outcome

Working closely with the Remuneration Committee chair and other key stakeholders, we developed high level plan designs that were then shaped and tested using internal KPI’s. Predictive analysis then was conducted to model potential scenarios reflecting both market comparability & affordability. Having refined the solution, we then drafted relevant documentation, including scheme rules, operational plan and invitation letters to participants. Working collaboratively, we were able to provide relevant insights to the client, shaping ideas and testing concepts that aligned with their purpose and direction of travel, meeting the required project deliverables on time and in budget.