A large downer of a down economy is the tendency for employers and employees to settle. Employers settle for B players because they can’t afford to bring in high performers, and employees settle for jobs they don’t like for fear they won’t be able to find work elsewhere.
It doesn’t have to be that way, says David Mansbach, co-president, North America for HVS Executive Search. HVS and Nation’s Restaurant News partnered last fall to conduct a comprehensive survey of compensation data and trends in the restaurant industry. The 2009 Chain Restaurant Executive Compensation Study is an in depth analysis of data on pay and benefit offerings from 78 companies, 55 of which are privately held and 23 that are publicly traded. Of the respondents, 20 were multi-concept operators, and 58 were single-brand operations.
- Purchase the full 2009 Chain Restaurant Executive Compensation Study.
- See a chart of industry medians for salary, long-term incentives and total compensation here.
- See a collection of median bonus targets and bonus caps for various titles here.
Mansbach recently spoke with Nation’s Restaurant News to discuss the latest recruiting and compensation trends. He says now is the time for restaurant executives to develop ways to attract and retain A players and purge their companies of poor performers. If moves are made today — amid the tough economic waters and while unemployment is still sky high — they will find themselves ahead of the pack when the economy turns.
Looking to increase pay or bonus structures may be tough for some operators in this economy. Isn’t there an attitude now that employees should just be grateful to have a job?
Times are tough, but that does not mean companies do not pay out bonuses … because things will get better. Employers have to be creative and pay bonuses out or risk losing high performers or being able to attract them. Employees don’t care if [corporate comps] are down. They care whether they are moving forward in their careers. Employees have long memories. They remember how they are treated.
Employees do care about the economy, though. Are you seeing people who are only staying in position because the job market is tough?
Ioften receive confidential calls from executives out there who have settled for opportunities. They call me and say if you hear of anything let me know. High performers have a job. They want a paycheck and they want to work. I can’t tell you how many qualified district managers out there are working as [general mangers] right now. It’s scary. What will happen when things turn around?
So what should companies be doing to keep those high performers happy?
They need to put a compensation strategy together that is committed to their internal customer. And they need to find a way to deal with the whole relocation issue.
Why is the relocation issue difficult now?
One issue that has definitely surfaced is the housing issue. So many people are underwater in their homes — meaning they owe more than their houses are worth. Some executives are so underwater [that] it has become a factor in the hiring process. In cities like Las Vegas or states like Arizona someone can be $250,000 to $500,000 underwater in their homes. It’s emerging as a trend in the senior level search.
How is negative equity in mortgages affecting executive recruiting?
Even from the most senior level searches have budget constraints, yet you want to recruit the best candidates. So either you pay a very hefty relocation package which is a problem for most companies or you increase someone’s base salary substantially to have them justify walking away from their undervalued homes. Then you may have an issue with a [vice president] or executive coming on board who makes substantially more than other people in the business.
Is there no better solution?
People have to meet somewhere in the middle. You give some relocation, but a somewhat higher base pay. And you have to put pay-for-performance programs together to make sure those bonuses are actually achievable.
If a company cannot afford to relocate their ideal candidate, do they not fill those positions?
Taking B players rather than A players is the trend. Positions need to be filled. The question is: Are they thinking objectively? Are they more worried about paying the heavy relocation for a superstar, and God forbid, it’s not a cultural fit.
So they hire a more affordable, second choice?
Right. I think there is a lot of settling in the hospitality industry because of relocation issues. It’s not the company’s fault; it’s not the [candidate’s] fault. It’s just a trend. People are not even hitting their [bonus] targets and … so base salaries have to be increased to make people [financially] whole.