‘But I Want More,’ Said the New CEO: A Salary Administration Fairytale

By BalancedComp

‘But I Want More,’ Said the New CEO: A Salary Administration Fairytale

A long time ago in the Land of Financial Bliss where money is never a problem, there was a young CEO who longed for base pay at the midpoint.

The CEO labored for two years at a struggling credit union and it must be understood that he served it well. After years of struggle, the company was finally back in the black. Surely he could name his prize.

The board rained down praise upon the head of the CEO, as well as his management team and employees. Still, the young CEO fell into a deep despair because his base pay was not at the 50th percentile of the marketplace. After all, he had sacrificed two years of his life and accomplished all that was asked of him.

The CEO’s executive managers heard the rumors that their leader’s salary had only been increased by $20,000, a mere 92% of the midpoint. The loyal employees bemoaned the fate of their CEO, who had favored them with pay levels of 110% of midpoint. In a furious rage, the CEO ordered his HR director to research the accuracy of the market rate. The humble credit union was consumed by a swirl of discontent.

The board did everything they could to raise the spirits of their magnificent CEO but to no avail. He could not be consoled.

What should we do?” cried the chairman of the board.

Some said, “Give him what he wants, lest he leave us for a better opportunity.

Other board members disagreed, saying, “If we cave, we are setting a terrible precedent and he will never be satisfied.

Finally, they summoned the Great Consultant Fairy. She examined the credit union with her magical looking-glass and asked the board about their compensation philosophy.

We want to be competitive to the market!” the board said in unison.

After summoning all the credible surveys of the land, the Great Fairy Consultant confirmed their current salary range was accurate.  A 92% compa ratio after only two years of experience is unusually aggressive, she observed, but it was in alignment with shrewd performance.

But he is still not happy,” exclaimed the incoming chairman.  

It feels good to make people happy,” reflected the Great Fairy Consultant, “but we can’t always control other people’s happiness.” Employees whose satisfaction is based on getting exactly what they desire are difficult to keep happy, even if you achieve it for a short time. Own your compensation philosophy or change it. Your guidelines are a magical path. If you follow the path, you will find your answer.

I must also caution you about situational ethics,” she continued. “Imagine if your next CEO is a member of a protected class, such as a giant or a mermaid. Perhaps you pay them differently for reasons that have nothing to do with their creature status. Beware, beware.

The young CEO’s most loyal employees had been listening behind the conference room door. Hearing this, they burst in and implored the Great Fairy Consultant to change her mind.  

Alas, I cannot,” replied the wise fairy. “However, I will grant you this: After reviewing your CEO’s total cash compensation, I noted that his short-term annual bonus is less than what an average performer would merit. Furthermore, his scorecard requires a nearly perfect performance to earn an average salary increase.

With the assistance of the Great Fairy Consultant, the board recreated the performance scorecard for the young CEO.

I deem this solution acceptable,” said the CEO.

And they all lived happily ever after … until the next annual salary review.

The End


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