No matter how skilled you are at negotiating, discussing executive compensation has the potential for making people tense or uncomfortable. The last thing anyone wants is to go into such a discussion unprepared. That’s why Carolee Colter and Mark Goehring created a general manager compensation process that gives boards and managers a step-by-step approach with proposal language that minimizes surprises and hard feelings. Using their template, the board’s review of the manager’s performance and the general manager’s compensation package are separate, allowing for greater fairness and efficiency.
L. Peter Erickson, president of the board at Linden Hills Co-op in Minneapolis, Minn., said that before they used the compensation process template this fall, they didn’t have much of a process. “We had no criteria for that, everyone had their own ideas. So as a result, I felt we needed more structure,” he said. The board agreed, and they adopted the CDS model. “We just jumped into Step 5,” he said, because the board was in strong agreement that the process was necessary and that they wanted to use it to fairly compensate their general manager. They tweaked the request for proposal to tie more closely to their co-op budget, and made sure that they clearly identified which lines on the financial statements they were referring to regarding fiscal goals. “It’s so nicely laid out and easy to understand. So far it’s been a good plan.”
Luke Schell, the co-op’s general manager, said that he really liked the RFP process, too. He found that the template was “all-encompassing” and hit on all the measurables for his job. “I followed it pretty close to the script. It was really easy to work from. The board looked at my proposal and then we came to an agreement on what it would look like. It was pretty painless.” In former management jobs Schell said he’d never been included in such a proposal or discussion, because it was always ‘here’s what we’re giving you.’ “It was exciting to have the opportunity to contribute to the process,” he said.
Video: Setting a Process for GM Compensation in the CBLD Library