IT STARTS WITH A MISSION STATEMENT 

 

            Modern’s mission statement is printed on a laminated card. The card is carried by every employee. The CEO promotes the mission at every new employee orientation. The mission statement reads: Our objective is to satisfy our customers by exceeding their expectations. We focus on equipment sales, service and rentals, specializing in material handling, construction, and maintenance products. We accomplish our objectives while maintaining high employee morale, revenue growth, and return on investment.

 The card also describes Modern’s basic beliefs:

  1. Outstanding customer service in everything we do
  2. A dedication to high ethical and legal standards in all aspects of conducting business
  3. A dedication to teamwork and partnership with our customers, suppliers and employees 4. A culture of continuous improvement and innovation
  4. Respect for the individual, family, and community
  5. Growth through performance and acquisition of quality organizations that fit Modern’s vision These simple statements are the basis for how Modern conducts its business. They are also reflected in the processes Modern uses to assess the performance of its employees.

 

STRATEGIC PLANNING PROCESS DRIVES ACTION

             The strategic plan spans three years and has very specific annual outputs and action items. These outputs are incorporated as targets in the long-term incentive plan. The strategic plan starts with the establishment of goals with the board, followed by a SWOT (strengths, weakness, opportunity, and threats) analysis modern’s markets, products, company, and economy. These then feed a preliminary budget to which the established goals are compared, and a gap to goal analysis develops. Annual specific action plans are created to drive results and to close the identified gaps. The annual goals are the basis for the annual incentive plans.

 Modern’s Goals Fall into Three Categories, Financial, Focus, and Cultural Financial.

  1. Achieve, and then exceed, NEBT goal of 5.0 percent of sales by 2009, less internals, exclusive of ESOP compensation expense (loan).
  2. Maintain a debt to equity ratio,
  3. Grow our business annually 5 percent greater than inflation. Inflation measure comes from consumer price index
  4. Maintain the 10-year compound growth rate of Modern stock at historical level of 10 percent.
  5. Achieve specific annual cash flow budget as defined by management and board tuned to annual objectives.
  6. Fund the compensation at the established loan repayment formula level plus an additional 5 percent of total compensation (normal contribution) over the strategic period of time for a total of approximately 8 percent of total compensation.

 Market Focus.

  1. Establish Modern as the premier regional service, parts, and rental company.
  2. Establish and maintain a product mix to obtain financial goals with an objective such that no one vendor accounts for 20 percent of total sales of the group.

Culture.

  1. Maintain a work environment and culture through Modern’s values that makes Modern an outstanding place to work. This includes salary at a competitive range, hourly wages at competitive regional rates, competitive benefits, competitive variable compensation, education programs, as well as an compensation and retirement programs.
  2. Establish and maintain a superior management team. Develop companywide succession and education plans to sustain the company.
  3. Maintain senior company management in industry and community leadership positions. All company goals are reviewed with every employee.

 

COMPENSATION PRACTICES IN A MIDDLE MARKET COMPANY

TALENT MANAGEMENT

                 Modern’s mission statement, values, and planning processes can only be realized by a qualified and motivated workforce. The “open door policy” is central to developing a culture that recognizes that success is linked to honesty and trust between the company and its employees. The open door policy means that employees can have direct access to higher levels of management if their needs are not met at lower levels. Part of the open book policy is a set of compensation and measurement tools that support the mission statement and Modern’s goals. 

               The open book means Modern shares all of its numbers. Once a month all employees receive an e-mail, identical to the information that the board receives, that reviews the company’s results. The results are also posted on the company’s share-point site which is available 24/7 to all employees. Once a year I, as the CEO, and our CFO meet with every employee in a roundtable format with the agenda driven by the employee. Annually a meeting takes place at which results are reviewed, goals presented, and recognition and rewards handed out. Each location holds a monthly meeting where results are reviewed with senior management and employee questions answered.

 

 

 COMPENSATION AND EMPLOYEE EVALUATION

               Modern has some specific benefits and compensation strategies that are tied to its internal assessment and hiring processes. Every employee, and candidate for employment, is evaluated against seven basic competencies. These core Modern competencies were established by modeling outstanding employees within Modern and the industry, benchmarking other well-run companies, and by working with a compensation consultant.   These seven core competencies define what Modern is looking for in an employee. It also has behavioral maps that are contained within each competency that have specific definitions that are grade-specific to define performance in each of these areas.

              For example, the definition of leadership is different for a rental coordinator than it is for a company president; both get evaluated in terms of the leadership competency but the behavioral metric is specific to a given level. In addition to these seven attributes and underlying grade-specific behaviors, the employee is also evaluated against specific goals and objectives for their department and function. These goals are subsets of the company’s overall goals and action plans and financial targets. In theory every employee’s goals roll up to their company and in return the group. 

              The combination of these two measurement areas allow Modern to establish the annual raise percentage, which is then applied against the midpoint of the grade or level. The midpoints represent the competitive rates within each of Modern’s three pay markets. The pay markets are the companies where Modern recruits for talent and measured in salary surveys. Midpoints move annually based on salary survey information on these pay markets. In addition to a structured evaluation and salary administration practice, Modern is deeply committed to variable pay.

                   Variable compensation consists of  several elements. All salaried employees are on an annual bonus that ranges from 8 to 50 percent of their compensation. These bonuses are paid against specific financial goals that tie to the annual operating plans. In addition, selected senior managers participate in a long-term compensation program tied to driving shareholder interests. All employees also receive an annual cash bonus that can range form 1 to 5 percent of annual compensation based on the overall company’s performance.

 

 

 

 

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