If there is one executive that the CEO-owner of a growing company almost always takes good care of, however, it is the chief marketing officer. "The typical entrepreneur in a young, small company will compensate people in relationship to his product market," explains consultant Cooke. "And in the growth stage, sales are everything. Salesmen, in fact, are often paid disproportionately just because the entrepreneur needs them so much." The lNC. survey shows that while chief marketing officers are less likely than the other members of the executive team to receive stock and/or board positions, they are often paid more direct compensation than some of their colleagues. For example, the average CMO gets a higher salary, and -- in bonus-paying companies -- receives a bigger annual increase as a percentage of base pay than the average chief financial officer.
"Marketing is everything right now," says Michael Drake, CEO and part-owner of Brell Mar Products Inc., of Jackson, Miss., explaining why he recently gave his chief marketing officer stock in the $1-million company, which makes hunting and marine accessories. "I can't afford to lose my guy, so I've got to find out what turns him on, and give him that. Within reason, of course."
Traditionally, the same has not been true for executives in engineering or research-and-development posts. Technical people, in fact, are frequently the last considered for improved compensation packages. That situation, says Bratkovich, is unfortunate and downright wrongheaded. "Talking about executive compensation without including your key technical talent -- you just can't do it. It is, after all, in its purest sense an asset-management, risk-management kind of thing. You have certain humanresources assets, and to the degree that those assets are critical to long-term survival, you build insurance programs, if you will, to protect those assets."
Corbett says a key part of that asset protection involves recognizing that the entrepreneurial bent that first attracts candidates to a start-up can also encourage them to strike out on their own someday. Many an entrepreneur has scoffed at the idea of designing compensation vehicles to deter such defections.
"I have a feeling," he asserts, "that compensation packages that orient themselves around that issue -- that give the executive more recognition, more opportunity for freedom -- are the packages that are going to be most successful in attracting and retaining executives."
CREATIVE COMPENSATION
They like to think of their companies as creative, innovative organizations blazing paths that larger companies can't or won't travel. But, when executives of small, closely held companies start to critique their own compensation policies, high on their list of defects is just that: a lack of creativity And many are of the opinion that they could spark more innovation by paying better attention to how larger companies are confronting compensation issues.
"Tapping into what the big guys are doing -- that's how you find out what vehicles are out there, and how you can plug them into your operation," says the CEO and co-owner of an Ohio construction-contracting company. "There's where the ideas come from." He is fascinated by the latest capital-accumulation plans, and, until the IRS declared "invalid" some versions of them, flexible-benefits options had looked good to him, too. So, as this CEO looks to enlarging his board of directors, one of his priorities will be to find at least one person who can keep him informed of such innovations, and offer advice as to their application in his organization.
Consultants, however, suspect that there is an inferiority complex at work here -- one that causes small-company executives to overlook the freedom they have to devise new compensation vehicles and policies specifically attuned to their own needs. "Smaller companies shouldn't be waiting for the larger companies," says consultant Edward Redling, of Wyatt's Executive Compensation Service. "They have a great opportunity to innovate on their own, because in a small company, everybody knows everybody. They can get things done outside of the bureaucratic process, which tends to institutionalize compensation policymaking in larger companies."
Large companies haven't exactly proven to be role models when it comes to dealing with change. They haven't been any more adept than their smaller counterparts at dealing with some of the more pressing compensation issues of the decade: such issues as how to create challenging promotions for people who don't care to ascend just to the next managerial level, or how to individualize packages for executives whose job descriptions and What's more, Redling says, the most effective compensation packages are those not merely discovered and "plugged in." Rather, they are developed or tailored to shape and reflect the individuality of the organization.
Hay Management's Jerrold Bratkovich agrees. In a more perfect world, he says, executive-compensation decisions would not be made strictly with finances, in-house politics, and the competition in mind. "I think the most important question that smallcompany executives can ask themselves is, Does our reward system support the kind of behavior we want from this organization -- the kind of culture we want to develop here? And, if not, how do we restructure it? It shouldn't be, What are the large companies doing? It should be, What can we do differently for ourselves? What can we do that's best for our stage of development and our kind of people?"
