Page 625 - Bruce Ellig - The Complete Guide to Executive Compensation (2007)

610 The Complete Guide to Executive Compensation

a consultant are not practical. This simply sets up a dueling match between the two
consultants. The committee must remember its fiduciary responsibility.
Which Consultant? Rather than immediately sign up a consultant, it would seem appropriate
to do a little market research. Some consulting firms have broad-gauge management views:
“We can tackle anything.” Others are more specialized in nature, ranging from total compen-
sation planning to only executive pay design. Each has its advantages and disadvantages.
Broad-gauge management consulting firms are more likely to design a program related to
the company’s short- and long-term needs; however, the extent to which such plans reflect a
creative approach will be a function of the degree of executive compensation knowledge, or
lack thereof, of the compensation consultant assigned. On the other hand, a top-notch pay
planner from a more specialized firm will be more likely to custom-tailor a plan. However, the
individual may not have sufficient broad-gauge management background to have accurately
assessed corporate needs.
Few committees seem to approach the problem objectively. Rather than identify one firm,
several should be identified and asked for an RFP (request for proposal). Each candidate
should be provided sufficient data to allow an accurate assessment—what, when, and
how much. Does the firm have the necessary expertise? Ask for references. A partial list of
questions to ask is shown in Table 10–13.

• What is the firm’s reputation? Is it trustworthy? Will it honor commitments?
• Are there potential conflicts of interest?
• What assignments have been done in the company’s own industry?
• What list of clients is provided for contact?
• What other work does the firm do for the company? What are the annual billings?
• Who will be the lead consultant? Do celebrity consultants come in to sell the client and then turn
over to juniors?
• What are the qualifications of those who will do the work?
• Is there a mutually clear understanding of what is expected when and from whom?
• Is there good chemistry between committee, management, staff, and the consultant?
• Will they be expected to help put in the plan, even administer it, or will they leave once it is adopted?
• What is the estimated cost for the project? How will potential cost overruns be handled? In what
detail will fees and costs be presented and when?
• Does the firm have any ties to management or members of the board (including committee
members)?
• Will the firm conduct an analysis after project completion of project quality?

Table 10-13. Questions to ask a potential consultant

Each proposal should be analyzed to determine if the problem has been accurately
defined as well as whether the approach suggested is feasible. A cost-benefit analysis of
the proposal should be prepared, including such items as consultant charges, company time,
disruption, and program cost.
In looking at consultants, one should also attempt to identify the loud proponents of a
specific form of plan. If Ms. X is recognized as a performance-share advocate, the company