Trends in senior executive compensation
It is also a challenging area for many corporations in Poland to address. Employees are attracted by many things, but at the end of the day, at the senior level, appropriate compensation cannot be undervalued.
It is difficult to make 'rules,' and, especially in the emerging markets of Eastern Europe, salary surveys and job grading do not often reflect the shallow marketplace that well.
Not only is Poland a melting pot for a wide variety of corporate pay practices, there is a diverse group of needs and concerns in the marketplace. Entrepreneurs often seek executives with 'passion,' for whom the financial reward is not the only motivation (often a euphemism for wanting to pay executives below their market value). On the other hand, public companies traded on the Warsaw Stock Exchange (WSE) are facing increasing scrutiny over executive pay (for the first time in Poland, although on a far lesser scale than elsewhere). Meanwhile, many multinationals, especially those that have focused on the internal development of talent, are locked into structures that are no longer competitive when they need to attract outsiders.
It is important that chief executives, human resource directors and regional business heads develop sources of accurate and up-to-date information about the marketplace. I will not offer a 'table' of average salaries, as that is beside the point. Rather, I have summarized some of the trends and issues in the compensation of Polish senior executives (board and management team members).
Trends
The Polish marketplace, for a number of reasons, has a relatively underdeveloped information base in terms of compensation. There is, firstly, only a limited amount of published information and disclosure. Secondly, with the advent of new market conditions, the compensation market has evolved and continues to evolve fairly rapidly - and with the influence of many different national cultures (U.S. and UK compensation styles are quite different) - creating different and conflicting standards within the marketplace.
For public companies there is a worldwide trend towards more transparency and accountability in the compensation of board members, especially CEOs, and this is dramatically changing best practice. For instance, just a year ago, for the first time in UK corporate history, shareholders vetoed the pay package of a CEO (GlaxoSmithKline). At the same time, one of the criticisms that has led to the reduction of Michael Eisner's authority as CEO of Disney has been related to his compensation and to compensation paid to several of his deputies (one of whom received a multimillion dollar golden parachute after just six months of work).
For multinationals operating in Poland, the tendency of executives is to be much more careful in planning and preparing compensation packages. Learning from the early 90s, when salary levels were increasing at an out of control rate, many companies are taking a close look at senior executives' compensation and negotiating much harder (even as the economy heats up). However, the pendulum may have swung too far. More and more often, international executives - especially those new to the CEE - expect significant or substantial differences between international compensation levels and the salary of local nationals. This stereotype blinds these executives to the fact that once beyond white-collar specialists and blue-collar workers, salary levels often reflect previous achievement and success.
On the other hand, in some industries and areas, Polish salaries already exceed those in Western Europe for positions at the same level. This is especially true in mid-management levels among smaller and mid-sized firms operating in this country. It has created a fairly substantial level of frustration (and is one reason why some of the professional 'economic' migration will not materialize).
Meanwhile, in private equity there is a lot of noise being made about management buy-outs or management buy-ins. This is an opportunity for a strong management team to transform a company in exchange for equity. Typically, these transactions would be financed by venture capital firms. However, these deals have so far been relatively scarce. If there is continued economic growth, and reform in the economy, then this type of transaction will become more common.
Overall, the increased level of senior executive unemployment in Warsaw is still at historic highs. This is being tempered by a readjustment of executive expectations - lower salaries and a readiness to compromise in position and career expectations.
However, despite this - and real reductions in relative executive pay in some areas - there is still a structural labor shortage at the executive level in Poland. In other words, there is a shortage of new executives to fill the future demands of employers. Partially, this is the result of the dynamics of the marketplace, and the increasing opportunities for successful senior executives are creating vacancies and needs even as others are resolved.
The Price of Talent
So despite the cooling of the executive pay market, top executives can still expect a premium to solve problems or take on complex challenges. The growing maturity of the market is demanding an ever more international caliber of senior executives. There is an increasing demand for ever greater qualifications and experience.
In particular, there is growing demand for executives with regional or international experience (meaning outside of Poland yet within the CEE). There is also increasing demand for top level, specialized management board members again (human resources (HR), IT, strategy, purchasing, etc.).
The result is that, for some roles, the range of compensation on the market is increasing substantially. For instance, an IT director may receive as much as zł.35-45,000 in some of the larger institutions in Poland, while the average on the market is roughly half that amount. The difference, of course, is not just compensation - there is most often a qualitative difference between the executives in the median with those at the top of the range.
More and more, the structure of a business - not just the size, but also complexity - becomes a factor in executive compensation. The largest Polish companies are often bigger or as big as their Western European counterparts. Furthermore, since many organizations have developed skills and succession planning internally, they look outside only when there is a 'skills shortage' or perceived problem requiring special help.
There are two main risk areas for corporations in Poland right now as the economy increases in pace and the impact of EU accession will be more and more visible.
First, as the labor market heats up, companies must find unique and attractive ways to compensate employees. International growth opportunities are one example, but job satisfaction is another. On the other hand, as executives become more sophisticated, they also become more demanding. If they learn that they have been underpaid and/or there are more challenging opportunities available, then nothing will keep them. So employers need to be realistic and up-to-date.
Secondly, as specific vacancies/problems/challenges emerge, it becomes advisable to look outside the company. HR best practice encourages succession planning and employee development, but it also recognizes the need for turnover, even within the more senior levels. A reality check on the marketplace often surprises companies when they look outside after waiting too long.
In our experience, the most frequent motivator for the very best top executives is challenge - they just assume the compensation will be appropriate.
Matthew Tebeau, the Managing Partner of Ray and Berndtson Poland and the Baltic States
It is difficult to make 'rules,' and, especially in the emerging markets of Eastern Europe, salary surveys and job grading do not often reflect the shallow marketplace that well.
Not only is Poland a melting pot for a wide variety of corporate pay practices, there is a diverse group of needs and concerns in the marketplace. Entrepreneurs often seek executives with 'passion,' for whom the financial reward is not the only motivation (often a euphemism for wanting to pay executives below their market value). On the other hand, public companies traded on the Warsaw Stock Exchange (WSE) are facing increasing scrutiny over executive pay (for the first time in Poland, although on a far lesser scale than elsewhere). Meanwhile, many multinationals, especially those that have focused on the internal development of talent, are locked into structures that are no longer competitive when they need to attract outsiders.
It is important that chief executives, human resource directors and regional business heads develop sources of accurate and up-to-date information about the marketplace. I will not offer a 'table' of average salaries, as that is beside the point. Rather, I have summarized some of the trends and issues in the compensation of Polish senior executives (board and management team members).
Trends
The Polish marketplace, for a number of reasons, has a relatively underdeveloped information base in terms of compensation. There is, firstly, only a limited amount of published information and disclosure. Secondly, with the advent of new market conditions, the compensation market has evolved and continues to evolve fairly rapidly - and with the influence of many different national cultures (U.S. and UK compensation styles are quite different) - creating different and conflicting standards within the marketplace.
For public companies there is a worldwide trend towards more transparency and accountability in the compensation of board members, especially CEOs, and this is dramatically changing best practice. For instance, just a year ago, for the first time in UK corporate history, shareholders vetoed the pay package of a CEO (GlaxoSmithKline). At the same time, one of the criticisms that has led to the reduction of Michael Eisner's authority as CEO of Disney has been related to his compensation and to compensation paid to several of his deputies (one of whom received a multimillion dollar golden parachute after just six months of work).
For multinationals operating in Poland, the tendency of executives is to be much more careful in planning and preparing compensation packages. Learning from the early 90s, when salary levels were increasing at an out of control rate, many companies are taking a close look at senior executives' compensation and negotiating much harder (even as the economy heats up). However, the pendulum may have swung too far. More and more often, international executives - especially those new to the CEE - expect significant or substantial differences between international compensation levels and the salary of local nationals. This stereotype blinds these executives to the fact that once beyond white-collar specialists and blue-collar workers, salary levels often reflect previous achievement and success.
On the other hand, in some industries and areas, Polish salaries already exceed those in Western Europe for positions at the same level. This is especially true in mid-management levels among smaller and mid-sized firms operating in this country. It has created a fairly substantial level of frustration (and is one reason why some of the professional 'economic' migration will not materialize).
Meanwhile, in private equity there is a lot of noise being made about management buy-outs or management buy-ins. This is an opportunity for a strong management team to transform a company in exchange for equity. Typically, these transactions would be financed by venture capital firms. However, these deals have so far been relatively scarce. If there is continued economic growth, and reform in the economy, then this type of transaction will become more common.
Overall, the increased level of senior executive unemployment in Warsaw is still at historic highs. This is being tempered by a readjustment of executive expectations - lower salaries and a readiness to compromise in position and career expectations.
However, despite this - and real reductions in relative executive pay in some areas - there is still a structural labor shortage at the executive level in Poland. In other words, there is a shortage of new executives to fill the future demands of employers. Partially, this is the result of the dynamics of the marketplace, and the increasing opportunities for successful senior executives are creating vacancies and needs even as others are resolved.
The Price of Talent
So despite the cooling of the executive pay market, top executives can still expect a premium to solve problems or take on complex challenges. The growing maturity of the market is demanding an ever more international caliber of senior executives. There is an increasing demand for ever greater qualifications and experience.
In particular, there is growing demand for executives with regional or international experience (meaning outside of Poland yet within the CEE). There is also increasing demand for top level, specialized management board members again (human resources (HR), IT, strategy, purchasing, etc.).
The result is that, for some roles, the range of compensation on the market is increasing substantially. For instance, an IT director may receive as much as zł.35-45,000 in some of the larger institutions in Poland, while the average on the market is roughly half that amount. The difference, of course, is not just compensation - there is most often a qualitative difference between the executives in the median with those at the top of the range.
More and more, the structure of a business - not just the size, but also complexity - becomes a factor in executive compensation. The largest Polish companies are often bigger or as big as their Western European counterparts. Furthermore, since many organizations have developed skills and succession planning internally, they look outside only when there is a 'skills shortage' or perceived problem requiring special help.
There are two main risk areas for corporations in Poland right now as the economy increases in pace and the impact of EU accession will be more and more visible.
First, as the labor market heats up, companies must find unique and attractive ways to compensate employees. International growth opportunities are one example, but job satisfaction is another. On the other hand, as executives become more sophisticated, they also become more demanding. If they learn that they have been underpaid and/or there are more challenging opportunities available, then nothing will keep them. So employers need to be realistic and up-to-date.
Secondly, as specific vacancies/problems/challenges emerge, it becomes advisable to look outside the company. HR best practice encourages succession planning and employee development, but it also recognizes the need for turnover, even within the more senior levels. A reality check on the marketplace often surprises companies when they look outside after waiting too long.
In our experience, the most frequent motivator for the very best top executives is challenge - they just assume the compensation will be appropriate.
Matthew Tebeau, the Managing Partner of Ray and Berndtson Poland and the Baltic States
