Betting on the Future: Korn Ferry Research Shows Retail CEO Bonuses are Increasingly Structured to Reflect Industry Volatility
August 20 2019 - 8:00AM
Business Wire
- Nearly 20 Percent of Companies Reward CEOs
for Planning for Evolving Strategic Priorities -
- Overall, Percentage of Retail Execs Who
Received Targeted Bonus Amounts Rose Nearly 25 Percent in 2019
-
As the retail industry continues to make its seismic shift from
bricks and mortar to customer-facing, omni-channel, AI-driven
companies, CEOs more and more are being rewarded for innovating and
planning for the future instead of simply achieving annual profit
goals. That according to new research from Korn Ferry
(NYSE:KFY).
Korn Ferry conducted an analysis of 68 North American retailers,
with median annual sales of approximately $6.6 billion,
representing approximately 2.5 million employees. The study found
that while company profitability is still the most prevalent
performance metric by which CEOs are judged, nearly a fifth (17
percent) of companies now have incorporated planning for evolving
strategic priorities as a key measure of success.
“As few as two years ago, strategic planning objectives were not
in the mix of what retail CEOs’ bonuses were based upon,” said
Craig Rowley, Korn Ferry senior partner and retail expert. “But now
it’s absolutely critical that CEOs formulate plans today to guide
their companies and tailor their offering to best suit customers,
embrace technology such as AI, and create seamless e-commerce
channels. If this isn’t happening, retailers will not survive.”
Another trend in CEO bonuses is an increase in the percentage of
their target bonuses – up from a median of 100 percent of base
salary just a few years ago to a median of 150 percent in 2019 for
their 2018 performance.
“In order to incentivize CEOs to achieve company goals, boards
have increased the bonus opportunity,” said Cory Morrow, Korn Ferry
senior client partner. “The impact goes beyond CEOs to other retail
executives – for example, the median COO target bonus rose from 95
percent last year to 100 percent this year.”
In terms of overall executive retail bonuses, 2019 actual
incentive payouts (for 2018 performance) were closer to target
bonuses than in 2018 (for 2017 performance). The average payout was
75 percent of target. Thirty-seven percent of survey participants
had payouts of at least 100 percent of their targeted bonus. That’s
a 22 percent increase from 2018, when 29 percent of retail
executives received at least 100 percent of their target bonuses.
In 2017, that number was only 15 percent.
“Despite ongoing store closings, the retailers who ‘get it’ and
are evolving with changing customer habits are seeing increasing
profits, which in turn helps boost bonuses,” said Rowley.
About Korn Ferry
Korn Ferry is a global organizational consulting firm. We work
with clients to design their organizational structures, roles and
responsibilities. We help them hire the right people and advise
them on how to reward, develop and motivate their workforce. And,
we help professionals navigate and advance their careers.
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Tracy Kurschner 612.309.3957 Tracy.Kurschner@Kornferry.com
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