Case Study: Redesigning Total Rewards for Technology Roles at a Global Retail Company

Published: June 2020

 

To keep up with advancing technology and consumer demands, a large global retail company seeks guidance for growing its technology leadership to support critical future initiatives.


In the face of economic uncertainty, it’s even more important for companies to keep up with constantly changing technology demands. The strongest technology leaders are best positioned to help their companies navigate success in this environment — whether it be in short term by troubleshooting remote working problems or in longer term through creating a technology strategy that plans for the future of work. Given the demand for technology experts across all industries, many of our clients are challenged to attract and retain talent for these roles.
 
Our recent partnership with a leading global retail company reflects these macro business and talent trends. We were engaged to help with the client’s people strategy for executive level technology talent. After discussions about their current benchmarking practices, technology organization, compensation philosophy, growth plans and talent needs, our Rewards Solutions team partnered with the client to develop a comparative framework and supporting philosophy for benchmarking executive technology roles using data from the Radford Global Technology Survey. This work resulted in a framework for the business with competitive benchmarks to manage new-hire compensation for top technology talent.
 
Below, we discuss the process in more detail and share key learnings for other organizations to consider when adding new job roles that arise when planning your workforce for the future.

Client Situation

Like many industries, traditional brick-and-mortar retailers can no longer survive without continuing to create and adopt new types of technology to better serve their customers and employees. To support such rapid digital transformation, several of our retail clients are creating brand new jobs for their organizations. This means that they must now also compete for new talent against not only other retailers but also e-commerce and other related technology companies. Therefore, finding the right programs to attract, compensate and retain employees is essential, requiring many firms to reexamine existing rewards structures and practices.

This was the situation for a large, global retailer when they approached us to provide insight into the current competitive market for the specific types of technology jobs the business needed to fill, as well as risk areas for loss of talent at their firm. The client’s main objective was to build its technical talent at the executive level to support critical business initiatives. Specifically, the company asked for assistance in the following areas:
  • Urgent comparative market benchmarking of competitive compensation levels and practices for several high-priority leadership roles that need to be filled immediately
  • Development of a new comparative framework for compensation practices, considering alternate approaches to peer identification and multiple comparison points to support decision making for technology investment and executive officers
  • Understanding the technology market for not only the compensation data, but also the people and exposure that the team has based on existing relationships with participants in the Radford Global Technology Survey

Our Approach

Our team began by gathering information from key leaders across the business, gaining insights on current practices and approaches, visions and expectations, as well as constraints and challenges. These initial discussions uncovered three core takeaways:
 
  1. The company wanted strong candidates with proven track records.
  2. Candidate expectations were far exceeding the company’s current rewards framework.
  3. The job specifications ranged from internal IT needs to developing technology products for external consumers. This doesn’t necessarily fit within a normal job framework — especially for technology companies.
Using this information, our team provided an approach that focused on collecting data from two perspectives. The first was from well-known, large technology companies leading the market. While these organizations are often considered incubators for technology talent, especially at the executive level, our retail client doesn’t necessarily compete on the same playing field for these roles. Therefore, when comparing to such companies, we didn’t look to the top roles, but rather the next level below the C-suite.
 
Upon considering this talent directly below the C-suite level, the question arose: For the candidates that are willing to look outside of tech giants, where are they most likely to move for a new role? More often than not, we find these candidates want to move into global leader roles at smaller or emerging technology companies. Our retail client couldn’t deliver this value proposition. However, creating a compelling rewards package could entice candidates that were predisposed to look only at roles in core technology companies.
 
The second data set we used to supplement our leading technology group was C-suite technology executives at high growth, emerging companies that are creating the next generation of technology. These candidates may be more willing to move across industry for a more strategic and higher level job.
 
These data points were then incorporated in our benchmarking methodology — made possible by the in-depth access and understanding of the Radford Global Technology Survey. As a next step, our team performed a high-priority compensation review for the positions that the client wished to immediately fill. This included a look at pay levels for base salary, as well as short- and long-term incentives compared to the identified peer groups.
 
“When we look at technology roles, we see a very dynamic talent flow. Both executives and lower level employees may move fluidly from large companies to startups and everything in between,” explains Carl Schmitt, an associate partner in the Aon Rewards Solutions business. “As a result, we find it helpful to bring a wide perspective to compensation benchmarking and look outside of the traditional silos of similarly sized companies, a single sector or percentile. Doing so will provide a full view of how pay levels and practices can vary and what it takes to be competitive for talent.”
 
Figure 1 illustrates the different value propositions at established technology companies as well as emerging technology firms — which includes established companies in other industries that are building their technology capabilities.

Impact and Results

Utilizing this benchmarking data allowed us to create a comparative framework, which served as a guide for developing and managing competitive rewards packages for executive technology roles. This guide allowed our client to see how its current structure aligned with market practices and what changes could be considered to offer market competitive pay for those positions.
 
As a result, the retailer gained targeted and informed compensation data to present competitive offers. However, the client found candidates’ expectations were still not aligned perfectly with the market and the company’s desire to pay at the 50th percentile rather than above the market median. With top leaders asking tough questions, the human resources team again turned to Aon, asking questions such as: “How do we reconcile expectations?” “Is there anything else we can do to attract candidates?”
 
The reality in the technology market is that many companies find they need to pay above the median for key talent, particularly for new hire roles. This is primarily for three reasons:  
 
  1. In general, new hires tend to be more competitively positioned against the market for cash, as employees expect or require a meaningful pay increase to warrant the risk of a new role. This is even truer for technology roles due to the growing demand for skill-specific talent.
  2. Equity compensation can vary greatly, with annual value for a technology VP ranging from $90,000 to $1 million. Unvested equity is used as a lock-in for key talent. An employee’s reward size might consider individual and company performance, outstanding value, unvested position and expected future contribution, which isn’t explained by just a single market data point.
  3. For new hires, there is an added expectation of equity value to entice candidates away from a job in which they are comfortable and not looking to move. As such, new-hire equity award values are typically in the range of two to three times ongoing annual award values.
 

“Employees hired within the last year for technical roles can have an almost 10% premium to the market for salary, which steadily declines with increasing tenure until around six to seven years. Because of this, companies are often recruiting technology talent at an above-market rate based on added pressures and skill-specific demands. Finding ways to manage this cost is top-of-mind for many of our clients.” - Hannah Kenney, Director, Rewards Solutions at Aon


Over the course of six months, the Aon team benchmarked more than twenty executive new hire technology roles, allowing for business growth and continuity, which is especially helpful during the current state of uncertainty. While initially focused on the U.S., the client eventually also leveraged Aon’s strong relationship with numerous global technology companies, expanding the analysis to incorporate other countries as well—a helpful resource when thinking about growth through the establishment of strong technology leadership across the globe. Even more, the project expanded to provide comparative data from other industries, ensuring that the client received a “full picture” view of the competitive market, as various business sectors continue to converge.
 
These key insights, informed by our in-depth and targeted market data, allowed our client to gain a deeper understanding of the technology market and how to evaluate the expectations of job candidates. From this, our client created a total rewards framework that supports competitive hiring practices. In addition, the total rewards team established themselves as a strategic thought partner for senior leadership by providing substantial advice supported by data. This group is now prepared to help move the business forward and make the right compensation decisions to attract and motivate the best candidates to fulfill the company’s future workforce needs.

Next Steps

The retail industry is undergoing tremendous change due to a growing e-commerce business and the adoption of new tools that allow companies to better understand customer behavior and preferences. To compete in this new business environment, companies are hiring people with specialized technology skills. However, filling these positions is not always as simple as it may seem, as the new-hire market for top tech talent is nuanced. Through our partnership, our retail client gained deep market insights into where the market currently stands and what improvements and adjustments need to be made — from revisiting long-term incentive programs to discussing new-hire premiums and ways to manage costs. With this newly acquired information, our client now has a strong starting point to determine next steps for developing a successful go-forward model to competitively reward its future workforce.
 
To learn more about how we can help your company develop a total rewards strategy supported by senior leadership, or for other workforce planning and compensation design questions related to technology roles and beyond, please reach out to the authors or write to rewards-solutions@aon.com.
 

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