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WARNING: When Senior Executives are Challenged to Justify their Salaries…

Ask any senior executive what makes them worth the salary they are paid, or where they add real value and many would struggle to give a meaningful response.

Those who try often relate to it being ‘the rate for the job’, ‘consistent with their peer group’, or state that it’s ‘what I’m worth’ – but then can’t explain why.

They might offer unconvincing explanations that they ‘have a key skill base’, ‘meet their targets’, or even that ‘they deliver results’.

Yet many still have difficulty validating them!

Senior executives would not sanction the retention of employees lower down the hierarchy if it could not be supported, so why can’t they justify their own value?

We expect to put a cast iron business case forward to defend capital expenditure proposals.

Yet often the case for salary is shrouded in, “We’ll need to pay £Xs to get the right person,” without establishing that £Xs is based upon their true value to the organisation.

Scaling

Job evaluation processes tend to calculate ‘job value’ and ‘salary levels’.

They do so by scaling based on the following:

    • Level of budget and authority responsibilities
    • Number of direct reports
    • Scope/complexity of the work
    • Educational/qualification requirements

The level of experience.

Who Is Worth More?

Ask yourself, who is worth more to an organisation?

A.   Someone who controls the procurement of £1m of raw materials? or
B.   Someone who reduces the cost of raw materials by £200k?

A.   Someone who manages the HR function for a 500 employee company? or
B.   Someone who protects the organisation from a £200k employment tribunal?

A.   Someone who manages the finances of a £100m turnover company? or
B.   Someone who generates £500k by optimising international currency transactions?

A.   Someone who manages a £40m key account portfolio? or
B.   Someone who brings in new key accounts adding £1m turnover?

A.   Someone who manages a COMAH speciality chemicals manufacturing site? or
B.   Someone who can increase manufacturing capacity by 38%?

A.   Someone who manages the IT systems for 1000 end users? or
B.   Who can remove the need for a further £500k investment with a £50 tweak?

Clearly, of course, the A and B in each group might be the same person, but:

If you are an ‘A’ person

You can guarantee there is someone out there who will happily do your job, just as well as you, and for much less than you are paid.

If you are a ‘B’ person

You deliver additional value to an organisation; and you can rightly claim to be a specialist in your field, and claim the rewards that go with it!

If you need advice on a complex medical condition, you would probably prefer to get it from a ‘specialist’ in that field, rather than a ‘general practitioner’.

Even though it might initially be more costly than a ‘generalist’, most would probably choose the ‘specialist’ in the expectation of getting the best possible advice.

If we then substitute a ‘complex medical condition’ with a ‘complex organisation’, we see that ‘specialists’ here too are probably worth much more than ‘generalists’.

It’s therefore important that senior executives start to present themselves as ‘value-adding specialists,’ if they ever have to uphold their salary packages.

Why Wait?

But why wait until shareholders demand that you justify your income?

It is the senior executive’s personal responsibility to position and present themself for the value they bring, or the difference they make to an organisation.

When they do, their own organisation might recognise their value, or another organisation might value them at an even higher level!

Calculating your Real Value

The challenge then is how senior executives articulate their value to an organisation.

What is their value if they can:

  • Reduce costs by £200k?
  • Prevent a £200k claim?
  • Generate a £500k income?
  • Add £1m new business?
  • Increase capacity by 38%?
  • Negate a £500k investment?

Clearly, anyone with the above capabilities is worth employing.

It is easy to see how the cost of employing a good senior executive – a ‘specialist’ – would be more than compensated for by the value they bring.

This makes the good senior executive a cost-negative resource; and possibly worth much more than their current ‘job-evaluation’ score might indicate.

So, it is in senior executives’ best interest to establish themselves as ‘specialists’, by recognising where they add particular value.

It’s in the organisation’s best interest to unleash their senior executives to become who they are capable of being!
Who then will care how much more they earn – they cost nothing to employ!!

By Bernard Pearce – The Executive Career Transition Specialist