Contracting with an executive compensation consultant to help design your executive compensation plans can be an important hire. Compensation consultants advise clients on many issues, including performance-based rewards and total reward strategies. But how do you select a firm that is right for your company?
Here are some tips for evaluating your executive compensation consultant.
Ensure Your Consultant Is Independent
When evaluating an executive compensation consultant, ensure that the firm is independent. Your compensation consulting firm should be free from any conflicts of interest. It should be a neutral third party when offering its recommendations regarding executive pay.
Types of independence include:
- Independence from management and the company.
- Independence from other consultants who advise your company.
Consultant’s Expertise
A good consulting company can provide detailed lists of its areas of expertise, including examples of past projects of executive compensation plans. It should also tell you how many years it has been doing this work and its past clients. Additionally, it is important that your consultant has experience working with companies with similar profiles to yours — or at least knows how to get up to speed quickly if necessary.
Specialties and Certifications
Other tips for evaluating your executive compensation consultant include keeping tabs on any specialties or certifications the consultants may have. A specialty can indicate expertise, but you can’t guarantee that it’ll be a good fit for you. If you’re looking for someone with experience in your industry, ensure a reputable organization has certified the person.
Experience in Your Industry
Don’t assume that an executive compensation consultant is familiar with every industry. A compensation consultant specializing in oil and gas might not be the best choice for a retail firm. Compensation consultants generally have experience in many industries, but it’s always wise to double-check your consulting firm’s background before engaging them on a project.
Communication Process Project Management During the Project
If you are working with a consultant, ask about the project management and communication process. Ensure the consulting company’s website provides information on its project management process. If not, ensure a process is in place to handle change requests.
Ask how the firm will communicate with you throughout the project and its communication style. You want an executive compensation consultant to keep you up-to-date on executive compensation plans in your organization.
Consultant Includes Expected Deliverables
It can be hard to determine what you’re getting for your money when you work with a consultant. As a result, it’s important to ask the following questions:
- What is in the proposal?
- How much time will the consultant spend on the project?
- How many resources will the consulting firm use? (Will the firm have an intern do all the work?)
- What are the deliverables? (Will there be a spreadsheet or a presentation?)
- What is the consultant’s goal for this project, and how does it align with yours?
Will the Firm Provide Tax and Regulatory Compliance Support?
Ask your consultants whether they will provide a plan design that meets tax and regulatory compliance requirements. The answer to this question can help determine if the consultant is qualified to perform the work.
Request References and Case Studies From Previous Clients
Check the references or case studies to ensure they are legitimate and relevant. You may also want to contact some of these references directly. If possible, try to find out if the consulting firm has a good reputation within its industry by talking with other people in similar positions (or potential clients).
Reviewing case studies can help clarify whether the consultant understands the job and can deliver results on time and within budget — the two things that are top priorities when managing executive compensation plans.
While the tips for evaluating your executive compensation consultant will help you assess your compensation consultant, ensure that the consulting firm is a good fit for your organization. The best way to do this is by asking questions and listening carefully to the answers.
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