Western Cape Business News

Send  Share  RSS  Twitter  23 Mar 2011

MANAGEMENT: Purse Strings Loosened to Attract Talent


Recent Western Cape Business News

Signs of economic recovery are becoming evident in the fact that more money is being spent on salary bills to attract and retain top talent.

So says Debbie Goodman-Bhyat, MD at Cape Town-based Jack Hammer Executive Headhunters whose specialist firm’s research shows that at the height of the recession in 2008 executive and specialist pay was largely stagnant across most industries, with increases merely keeping up with inflation.

But, figures show that since mid 2010 and continuing into the first quarter of this year companies are loosening purse strings in order to compete for high demand executive skills.

This is not happening across the board in all sectors, at every job grade and for all new hires” emphasizes Goodman-Bhyat, who contextualizes this trend by noting that the willingness of corporates to pay for people is taking place mostly at senior management and director levels, for roles that require highly specialized skills that are in short supply, combined with additional personal attributes including leadership expertise and employment equity.

Goodman-Bhyat says that in South Africa, cost to company (CTC) packages for those who were earning in the region of R1.2mil and above in 2009 and early 2010 have shown above inflation increases over the last 9 to 12 months, which have been substantial in some cases. This may be in part due to the fact that during the economic downturn in 2008, salary increases were minimal at best, and so now companies experiencing a recovery are making some adjustments in salaries.

But these increases in executive packages in South Africa are not isolated, as confirmed by a recently released executive compensation survey in the US, which shows that in 2010 there was an overall increase in total compensation for CEOs of 39%,” says Goodman-Bhyat.

Despite increases in executive packages, there is a fundamental restructuring of how top executives and specialists are paid, in a move away from the element of ‘executive gambling’ in the market and in an attempt to instill a culture of governance, diminished risk taking, and a long term approach amongst professionals tasked with driving growth in organizations.

New payment structures such as bonuses being paid out partly in cash and partly in shares or share options, which by their nature are staggered over several years, are being put into place to encourage loyalty and a long term view. Banking and investment firms in particular are placing a strong emphasis on motivating alternative behaviour in their key executives and specialists.”

Goodman-Bhyat notes, “Another interesting adjustment implemented primarily in the South African branches or subsidiaries of multi-national stockbroking and investment banking organizations is a significant increase in guaranteed base package – up by around 25 to 35% - with much lower bonus earnings. These bonuses, which are performance-based, had in the past encouraged short-term risk taking – behaviour that these types of companies are attempting to change by placing less emphasis on incentive-based pay”.

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