How Career Transition Services Make a Difference

“Career Transition services?  You just help people write resumes, don’t you?”   And so goes the myth about what career transition services are really about.

So what are career transition services, and do they really make a difference?  It’s true that career transition programs include reviewing and updating resumes!  But let’s take another look to see what else is included.

When we look at the name “career” + “transition”, we’re reminded that there are two parts to this service.  Transition is actually an important, and often underestimated component.  Job loss, whether based on economics, poor working relationships, merger or other restructuring is just that – a loss.  Like the loss of any other important relationship we have, individuals will react differently.  For some, the emotions that arise at this time – shock, denial, fear or anger – all serve to undermine confidence in moving forward.  And for those who experience depression, job loss can be a compounding factor and make the challenge of moving forward seem almost insurmountable.

Skilled career transition professionals understand how to meet people ‘where they are at’.  Having an experienced career transition professional on site when a termination meeting is being conducted to provide immediate support to the employee is an effective first step in minimizing shock and engaging the individual in actions and steps that orient them toward a new future.  Beginning a trust-based relationship between the Career Transition specialist and the terminated employee is a good outcome from this initial, sometimes awkward meeting.

As most folks understand, the “career” part of the career transition equation is managing steps toward landing new employment.  That’s the work of updating a resume, creating a job search strategy and preparing for interviews.  All of these steps required self-confidence.   If, because of residual anger or fear, self-confidence is low, completing these tasks effectively will be a challenge.    However, with the support of a dedicated career transition coach – someone who’s seen them on the worst day and is willing to meet with them on the day after – an individual will move past negative emotions more quickly than if left to struggle through these challenges on their own.  This is what enables the individual to move back into the workforce faster.

That’s the key advantage for any organization considering whether or not to bring in career transition professionals.  The organization’s former employees will be able to get back on their feet – both emotionally and from a re-employment perspective – faster. 

The Prepared Leader

Terminating an employee is probably one of the most difficult tasks any leader will undertake.  There are balancing needs that must be faced in each notification:  the needs of the employer; the needs of the employee being terminated; and the needs of the remaining team.  The prepared leader plays a pivotal role in addressing these competing needs.

What outcome does the employer seek? 

The employer wants the employee to know that their employment is ending.  Period.  This information must be communicated clearly.  If there are business reasons – economic challenges, change in business direction – causing the termination, a brief reference to this context may help the individual understand that this is indeed a business decision and not a result of their own performance.  If the termination is a result of cumulative poor performance or behavior that’s been documented and discussed with the employee, re-hashing this during the termination meeting will not change the outcome, so this is best left unsaid.  The employer needs assurance that the leader charged with delivering this message does not veer into personal opinions that are not part of the company message, creating any vulnerability for the company at the end of the working relationship. 

How does the leader’s delivery of this message impact the employee? 

Work collaboratively with your HR representative to coordinate and co-facilitate this meeting.  An effective leader will make their message clear and concise.  They will ensure they demonstrate their respect for the employee by delivering this information in a closed door setting – a private office or a private meeting room.  The leader will briefly indicate that as of today, the individual’s employment is ending.   The leader may choose to thank the employee for their contribution.  After hearing about their job ending, many people stop hearing anything further.  At this point, the leader can leave the employee with the HR representative, who will review details about severance, departure, etc.

What does the leader need to consider with respect to the remaining team? 

Depending on the circumstances, remaining employees may be concerned about workload, about the security of their own employment, about leadership or about the stability of the employer.  The leader will want to think about those issues, consult with Human Resources and / or the organization’s executive team and decide what the message(s) back to remaining employees will be. This could include a team meeting, held on the same day as the employee termination, but at a later time. Or, with a smaller team, the leader may choose to speak to team members on an individual basis. The effective leader will invite questions or comments and listen carefully to what is said to gauge the mood of remaining employees.  As workload allows, a good leader will be visible and available in the days immediately following a termination for further questions or concerns.   The goal is to maintain workplace continuity and to do so, it helps to demonstrate that employee terminations are handled fairly and with empathy.  

The New Norm in Director Pay

NACD Director Compensation ReportLitigation challenging director pay has made headlines over the past 18 months with shareholders alleging that pay is excessive pay or challenging the processes by which pay is set. The reality is, however, that a new norm of modest pay growth has settled in across American boardrooms, according to the Pearl Meyer/NACD 2015–2016 Director Compensation Report.

Elements of Board Pay Remain Steady

The report, co-produced by NACD and the executive compensation consulting firm Pearl Meyer, reveals that over the past five years, median director pay increased annually at a rate of 3 percent to 5 percent per company, while year-over-year pay increased between 1 percent to 5 percent. This steady but incremental trend is attributable to the typical board practice of only suggesting changes in pay every two to three years. Low- to mid-single-digit pay increases are expected to continue for the next several years unless a significant catalyst for change occurs.

In 2015, the numbers rose slightly from the average, save for micro companies, whose directors saw a compensation increase of 9 percent. Pearl Meyer attributes this jump to minor changes occurring in the constituent companies that are surveyed year over year, and to their volatility as high-growth oriented enterprises that quickly exceed the $500 million mark.

Jannice L. Koors, managing director at Pearl Meyer and head of the firm’s Chicago office, noted that pay practices appear to be reverting to those seen prior to the passage of the Sarbanes-Oxley Act of 2002 (SOX). “The pendulum is swinging back to director compensation in the pre–SOX days, when pretty much all director staff was paid the same,” she said. The concept underscores the board’s unity when, in Koors’ words, “something goes bump in the night.” “If all the board members’ feet are going to be equally held to the fire, then is it really appropriate to have differentiation in how the committee members were paid for that liability risk?” she asked.

Use of Cash Retainers Increases, While Pay for Committee Members Is Limited

Another element that has demonstrated statistical prevalence is the rate of cash retainers for directors across companies. Ninety-seven percent of companies offer cash retainers to their boards as compensation for their service. The cash retainer typically makes up 32 percent to 36 percent of total director compensation (TDC) packages. Equity grants also continue to comprise a large portion of a director’s pay package—93 percent of companies offered grants. Companies of all sizes offered equity grants at a fixed dollar value rather than a fixed number of shares. This practice is perceived to better align directors’ stewardship and oversight responsibilities. When these fixed-value equity awards are included in TDC, the number of shares is typically adjusted to each grant date based on the price of the stock to provide an equivalent value each year.

One standout figure in this year’s data emerged in the differentiation of compensation by committee role. Audit committee chairs received the highest level of compensation across company types at a median level of $20,000, with compensation and governance committee chairs receiving progressively less, at $15,000 and $10,000, respectively.

A similar trend is reflected in the median total compensation figures for all committee members, which includes both retainers and meeting fees. However, the prevalence of compensation for committee members decreases with the size of the company. Members of both the compensation and the nominating and governance committees at Top 200 companies—the largest 200 companies in the S&P 500 by revenue—are not compensated at more than half of the companies surveyed, which results in median compensation of zero dollars for these committees when averaged with those that do provide retainer or meeting fees for committee service.

“I don’t know that I would ever see the trends moving to a place where committee compensation goes away across the board for all companies in all situations, because there are some very legitimate reasons where committee pay actually makes sense and plays a role where the workload isn’t even,” Koors said.

Legal Implications Regarding Pay

Three recent court cases that have either been adjudicated or are in process open the door to potentially significant changes in director pay practices.

  1. In an ongoing case being heard in the Delaware Court of Chancery, shareholders of Citrix Systems have accused directors of awarding themselves excessive equity compensation in a pay plan that was ratified by shareholders in 2005. Shareholders claim that directors failed to accurately and fully disclose several details during the process, specifically the amount or form of compensation to be rewarded to the non-employee directors. Additionally, shareholders allege that only five of the 14 peers selected for comparison in the ratified pay policy were true industry peers.

    Directors argued the stockholder ratification defense when seeking to have their case heard under the business judgment rule. The court ruled, however, that the ratified Citrix payment plan was indeed not specific enough, hence disqualifying the Citrix board’s case from being heard under the more deferential business judgment standard.

  1. A case against Goldman Sachs, brought by shareholders before the Delaware Court of Chancery in June, alleged that directors bear the burden of proving the entire fairness of a per-participant limit of 24.75 million shares, which was valued at $2.8 billion when the case was filed. While the same might not be true for Citrix, it appears as though Goldman Sachs based its compensation on a true peer group. A decision is pending.
  1. At Facebook, Chair and CEO Mark Zuckerberg and the board came under fire in 2014 for the process used to ratify director pay. That case, which went to trial under the entire fairness standard, argued that Zuckerberg’s deposition and affidavit of approval of the director compensation plan put forth by his board was not valid, as Zuckerberg was acting for the directors as an interested party and violated the rule that such transactions must be approved by a vote at a stockholders meeting or by written consent. Facebook settled in late January after Zuckerberg’s ratification was deemed invalid by the Delaware Chancery Court, and the social media company agreed to stricter oversight of director compensation.

Koors suggests that all boards take the time to ensure their disclosures accurately and clearly reflect the rationale of the director compensation program, with full highlights of their skills, qualifications, demographic diversity, and details on the nomination and board re-evaluation processes. More robust communication regarding director selection and compensation could help mitigate proxy season disruption, as well as protect against the types of litigation described.

Survey Methodology

Pearl Meyer’s 17th annual survey of non-employee director compensation examines key director compensation elements as collected from 1,400 companies across 24 industries, and derives its findings from proxy and other financial statements that disclose director compensation information for the fiscal year ending between Feb. 1, 2014, and Jan. 21, 2015. Companies were assigned to one of the 24 industries based on their industry classification within Standard & Poor’s Global Industry Classification Standard (GICS). Data for the survey was collected in part by Equilar Inc. Comparisons are made to the Pearl Meyer/NACD 2014–2015 Director Compensation Report. All companies surveyed are publicly traded.

This blog is excerpted from an article originally published in NACD Directorship magazine’s March/April 2016 issue.