AchieveNEXT 2022 Compensation Study

2021-2022 Mid-Market Talent Acquisition, Compensation, and Culture Study powered by

ABOUT ACHIEVENEXT No one upskills the mid-market like AchieveNEXT. AchieveNEXT combines subscription Peer Networks for Finance and HR leaders with a suite of Talent Performance Solutions to provide data, insights and solutions for NEXT level “people” results. Learn more at achievenext.com

ABOUT INSPERITY

Insperity®, a trusted advisor to America’s best businesses since 1986, provides an array of scalable HR solutions designed to help companies maximize productivity and manage risks. Offering the most comprehensive suite of products and services available in the marketplace, Insperity delivers the optimal blend of service and technology to bring administrative relief, reduced liabilities and better employee benefits through Insperity-sponsored plans. With 2020 revenues of $4.3 billion, Insperity is currently making a difference in more than 100,000 businesses with over 2 million employees nationwide. For more information, visit www. insperity.com/partner/cfoa/

2021-2022 MID-MARKET TALENT ACQUISITION, EXECUTIVE COMPENSATION, AND CULTURE STUDY, POWERED BY INSPERITY

“The pandemic has created changes for emerging and mid-market businesses and the talent they have and the talent they need, that simply won’t be undone.” — Nick Araco, AchieveNEXT CEO

INTRODUCTION

In August 2021, AchieveNEXT, in partnership with Insperity, surveyed a cross-section of US-based emerging and mid-market CFOs and CHROs about talent acquisition, executive compensation, and workplace culture. The resulting study provides finance, HR and other C-suite leaders with a reliable, unbiased source for benchmarking talent acquisition, executive salary, incentive programs, talent acquisition strategies, and culture against similar enterprises. After the whipsaw of the last couple of years, it is more important than ever to understand the packages and practices that will attract and retain the people needed to drive enterprise growth and success to the next level. In this, our 8th annual compensation and culture survey, we go beyond the numbers about CEO, CFO, CHRO, and other executive pay to look into what factors are in the talent equation: pay and benefits, to be sure, but also talent planning, culture, personal growth and development, and the other elements, tangible and intangible, that attract people, retain them, and motivate them to do their best. The lesson from the numbers now: It’s time for emerging and mid-market enterprises to be more active investors in the capabilities and processes that attract and keep key people. Money isn’t enough. Benefits aren’t enough. And nor are “easy” soft benefits like the fact that most employees are on a first name basis with the CEO. No, what’s needed are specific investments that make leaders better, help all employees grow, and bring in new and diverse talent pools. Eighty percent of the respondents represent enterprises with annual revenues between $10 million and $1 billion. Nearly 75% of the surveyed companies are privately held; 12% are non-profit; and more than 50% have no private equity or venture capital backing them. To discuss the results, request a customized analysis or for more information about AchieveNEXT and the CFO Alliance and CHRO Alliance Peer Advisory Networks, contact AchieveNEXT Networks’ Member Engagement team and Greg Wood, at Greg.Wood@AchieveNEXT.com.

2021-2022 Mid-Market Talent Acquisition, Executive Compensation and Culture Study — Powered by Insperity I 3

METHODOLOGY The CFO Alliance’s 8th annual Mid-Market Talent Acquisition, Executive Compensation, and Culture survey was sent to finance and HR leaders from more than 5,000 North American emerging and mid- market enterprises. The participating enterprises provided detailed information on base salary design, short- and long-term incentive programs, details about their respective cultures, and information about their challenges and successes in attracting and retaining talent. The data is presented in a format that allows for benchmarking, best practice sharing, and peer learning, as well as for aggregate and custom analysis — integral to the DNA of AchieveNEXT and to Insperity. Unlike most annual salary surveys, this report allows enterprises to benchmark the design and variations of short- and long-term compensation programs, including the components and total compensation of CFOs, controllers, accounting managers, HR leaders, and other C-Suite leaders, including sales, marketing, and operations leaders. Additionally, the survey identifies and quantifies trends in how culture, compensation, and talent acquisition impact top-line, bottom-line and shareholder value.

In addition to the operating team from AchieveNEXT, this year’s Study includes contributions and analysis from Insperity.

Participant Demographics

Enterprise Employees

6.3% Banking/Investment Banking/Investing 5.7% Construction, Engineering, and Architecture 4.7% Distribution, Logistics, and Warehousing 6.3% Hospital and Health Care 5.2% Information Technology and Services 7.8% Non-Profit 8.3% Professional Services 9.4% Software/SaaS Top Industries

Enterprise Employees

< 50 51 - 300 301 - 1,500 1,501 - 10,000 > 10,000 < 50 51 - 300 301 - 1,500 1,501 - 5,000 5,001 - 10,000 > 10,00

28 %

44 %

20 %

3 %

6 %

2 %

1 %

0% 10% 20% 30% 40% 50% 0% 10% 20% 30% 40% 50%

Annual Revenues

Ownership Structure

Ownership Structure 13 % 13 % 23 %

< $10MM $10 - 50 MM

3%

Enterprise Revenue:

4%

Publicly Listed Not-For-Prof it Publicly Li t t-F r- r fit

18%

9%

< $10MM $10 - 50 MM $51 - 250 MM $251 - 500 MM $501 MM - 1 BN > $1 BN

$51 - 250MM $251 - 500 MM $501MM - 1 BN > $1 BN Private Equi ty/Venture Capital -Backed Privately-Held ( LLC, family, closely held) ESOP Private Equity/Venture Capital-B Privately-Held (L C, fa ily, clo ) ES

50 %

26%

2 %

0% 10% 20% 30% 40% 50%

0%

10%

20%

30%

40%

50% 60%

40 %

4 I 2021-2022 Mid-Market Talent Acquisition, Executive Compensation and Culture Study — Powered by Insperity

KEY FINDINGS

Analysis of the survey data revealed four trends for finance, HR, and other C-suite leaders to consider as they close out 2021 and head into 2022. Most respondents have realized financial performance and growth that are much stronger than 2020’s Covid-affected results. Recovery, rebound, and re-energizing have produced four kinds of challenges and responses for middle market and emerging enterprises to consider: 1. Compensation for executive and senior-level leaders has increased solidly and across the board. For many companies, compensation went into a holding pattern in 2019-2020. Now, with robust growth for most companies, executive and top team compensation has increased across the board. The biggest beneficiaries have been executives with direct revenue responsibility—sales and marketing leaders. Short-term incentive packages show increased emphasis (compared to past years) on revenues in addition to profitability. We also saw a doubling in the number of enterprises that include measures of customer and employee satisfaction among the triggers for incentive compensation. 2. Enterprises are struggling to keep and find critical skilled talent in the face of the “ Great Resignation .” Companies’ talent shortages are of two kinds—difficulties finding talent and difficulties keeping it. Finding talent is difficult across the board—executive, managerial, technical/specialist, experienced workers, and hourlies are all hard to find, with technical and specialist workers most scarce. But retention problems are concentrated in the technical/ specialist and experienced worker categories. Both attraction and retention need to be addressed to increase growth and performance—but the attrition/retention problem may have special urgency and expose the most significant weaknesses in middle-market talent planning toolkits and capabilities. 3. Acquisition and retention problems cannot be successfully addressed with “same-old, same-old” initiatives and activities. Indeed, a large majority of companies say that they lack the tools and capabilities to address the talent challenges they face. Looking more closely, they’re trying to address the problem by throwing money at it—changes in pay and benefits. Even the non-monetary strengths they cite—the top two are access to senior management and to mentors—are functions of the size of the enterprise more than of any intentional actions or capability-building. But companies are not giving enough attention to the underlying factors: culture, a sense of personal growth and accomplishment, talent development, career pathing, and diversity.

2021-2022 Mid-Market Talent Acquisition, Executive Compensation and Culture Study — Powered by Insperity I 5

4. Mid-market and emerging enterprises need to reimagine employee value proposition to support growth. One way is to improve management broadly—so that the experience of working is better for both leaders and followers. Respondents identify communication, emotional intelligence, and critical thinking as the leadership skills in shortest supply. Among the solutions they say they need are: more executive coaching and more learning and development (L&D). Second, they need to address culture and talent issues directly. One way can be to enhance DE&I efforts, which benefits them by enlarging talent pools and increasing engagement. This is a companion to enhanced career pathing, L&D, succession planning, and other programs to give people a view of, and agency in, their own personal and professional development. Finally, it is critically important to build functional capability in finance and HR so that these functions go beyond the basics of accounting and compliance to address the larger questions of use and development of capital and human capital.

“The surging demand for talent has changed the compensation approach for many companies.

“For the middle market, this means identifying core functions and, quite possibly, identifying partners that can add capability in areas smaller companies just cannot afford—cybersecurity, FP&A, sophisticated benefits planning, and the like, to make the most of the slim resources Middle Market companies are likely to have and maximize return on knowledge.” — Thomas A. Stewart, Chief Knowledge Officer, AchieveNEXT

‘Throwing money at it’ is usually the quickest way

companies react, but it doesn't address long-term challenges. In the medium term, companies can modernize pay and benefits packages and roll out more advanced retention programs, like career pathing. Ultimately, success will come to companies that combine those changes with a long-term, strategic approach to culture, compensation, and career.”

Rebecca Messina Compensations Services Manager, Insperity

6 I 2021-2022 Mid-Market Talent Acquisition, Executive Compensation and Culture Study — Powered by Insperity

KEY FINDINGS

1. COMPENSATION FOR EXECUTIVE AND SENIOR-LEVEL LEADERS HAS INCREASED SOLIDLY ACROSS THE BOARD. Compensation Trends By and large, executives in emerging and middle market companies fared better in the last twelve months than they did in the same period a year ago. Average pay for CEOs, which dropped slightly a year ago, this year rose from $360,417 to $389,740. Across the C-suite generally, base pay rose more than it had. It figures. As a large majority of companies returned to growth starting in the second half of 2020—often robust growth—coming through Covid, it makes sense that base pay would grow, too.

Changes in Base Salary 2021 over 2020

0 Changes in Base Salary 2021 over 2020 0 10% 0.1

0.2

0.3

0.4

0.5

0.6

20%

30%

40%

50%

60%

CEO CFO Top Operations Executive Top Sales Executive Top Marketing Executive Top HRExecutive Controller

Stayed the same Increased < 5% Increased > 5% Decreased t e sa I r t

CEO Compensation

CEO Compensation

2021 Trends in Base Salaries. Overall base salaries increased from 2020 levels for middle market leaders, with the biggest gains in base compensation for the C-suite leaders in finance, sales, and marketing .

0 250000 500000 750000 1000000 1,000, 0 750, 0 0, 0 2 0, 0 0

Base Salary Short Term Incentives

2021-2022 Mid-Market Talent Acquisition, Executive Compensation and Culture Study — Powered by Insperity I 7

Base salary was unchanged for just over half of CEOs and 27% got raises greater than 5%. Base pay increases were not out of line, given enterprise growth performance; 43% of middle market enterprises expect to book EBITDA growth above 10% in 2021. (The year before, by contrast, 58% of CEOs had no change in base pay and 11% received a raise of more than 5%.) At the same time, nearly a third got short term incentive pay worth between $150,000 and $500,000. Finance, sales, and marketing leaders enjoyed larger percentage base-pay increases than their boss, with more than 54% of CFOs getting raises, as did 54% of CMOs and 61% of heads of sales. In the companies responding to this survey, not one sales leader took a salary cut—a reflection of the generally robust revenue growth these companies enjoyed and the importance of sales leadership and sales relationships to sustained top-line performance.

“While revenue growth is always a key metric, it’s the major focus for companies as they continue to navigate the pandemic. The sales leader has been even more under the spotlight and in many cases has delivered outstanding results—as the data on sales- leader compensation show. The challenge for sales leaders is how to maintain their torrid sales pace and turn new business into deep relationships as the pandemic eventually winds down.” — Ed Wallace , Managing Director of Human Capital, AchieveNEXT

The structure of short- and long-term incentive packages has evolved in the last year. Two changes are particularly

notable. One is an increased emphasis on revenues as a trigger for short-term incentive pay. A revenue incentive figures into the compensation plan for 41% of C-suite executives, up from 28% in 2019-20. More companies also base incentives on EBITDA and operational goals. The second noteworthy change: Customer and employee satisfaction can trigger incentive pay in 10% of companies; those numbers, while not large, are double what they were in last years’ survey. That trend is likely to continue: Forty-four percent of respondents say that they either already offer or plan to offer non-financial incentives based on goals such as diversity and inclusion, customer experience/ satisfaction, and employee experience. Not surprisingly, sales and marketing executives are most likely to be rewarded for hitting revenue and customer satisfaction targets, while HR executives are most likely to have human-capital targets and, across the board, less likely to be given a personal stake in financial performance. Also appropriately, the CEO, COO, and CFO—three executives with the most responsibility for cost—are most likely to have profitability as well as revenue targets.

8 I 2021-2022 Mid-Market Talent Acquisition, Executive Compensation and Culture Study — Powered by Insperity

Which types of long-term incentive compensation does your enterprise have for each of the following functions?

C-Suite Executives

Finance (Non Executive)

Sales (Non Executive)

Operations (Non Executive)

Marketing (Non Executive)

Human Resources (Non Executive) Resources

Stock Options

26% 18% 23%

17%

14%

13%

18%

10%

Performance Shares

9%

7%

8%

30% 35%

26% 37%

Restricted/ Phantom Stock Long-Term Cash

13%

14%

13%

13%

6%

6%

5%

8%

2%

2021 Tr nds in Long-Term Incentive Compens

2021 Trends in Long-Term Incentive Compensation

10.00% 15.00% 20.00% 25.00% 30.00%

30%

25%

20%

15%

C-Suit e Ex Finance (N Sal es (Non Operation Marketing Human Re

10%

0.00% 5.00% 5%

0% 1 Trends in Long-Term Incentive Compensation

StockOptions

Performance Shares

Restricted/ Phantom Stock

Long-Term Cash Plans

C-Suit e Executives Finance (Non Executive) Sal es (Non Executive)

Operations (Non Executive) Marketing (Non Executive) Human Resources (Non Executive)

2021-2022 Mid-Market Talent Acquisition, Executive Compensation and Culture Study — Powered by Insperity I 9

There are significant differences in long-term compensation depending on the ownership and governance of a company. For example, public company executives are almost universally offered stock options, but rarely offered phantom stock or performance shares. Private companies differ considerably depending on whether they are PE or VC backed, on the one hand, or otherwise privately help (which includes family businesses) on the other.

0% 10% 20% 30% 40% 50% 60% 70% Long-Term Incentive Compensation by Ownership Private Equity/Venture Backed Privately-Held (LLC, fam closely held) Long-Term Incentive Compensation by Ownership: Private Companies StockOptions Performance Shares Restricted/ Phantom Stock Long-Term Cash Plans 70% 60% 50% 40% 30% 20% 10% 0% 0% 10% 20% 30% 40% 50% 60% 70% Long-Term Incentive Compensation by Ownership Private Equity/Venture Capital- Backed Privately-Held (LLC, family, closely held)

Annual Base Salary By Position

$200 - $250k

$250 - $500k

$500 - $750k >$750k 2021 AVG 2020 AVG

Salary

<$150k $150 - $200k

Chief Executive Officer

2.31% 6.36% 11.56% 16.76% 36.99% 26.01% $389,740 $360,417

Chief Financial Officer

17.92% 24.86% 23.12% 31.21% 1.73% 1.16% $255,347 $250,984

Chief Operations Officer

25.47% 24.53% 17.92% 31.13% 0.94% 0.00% $236,792

N/A

Top Sales Executive

25.56% 21.11% 33.33% 18.89% 1.11% 0.00% $219,722 $221,296

Top Marketing Executive

43.21% 25.93% 12.35% 18.52% 0.00% 0.00% $193,827 $199,432

Top HR Executive

59.75% 18.87% 12.58% 8.81% 0.00% 0.00% $161,478 $189,224

9 <$60 k $60 - $80k

$80 - $100k

$100 - $125k

$125 - $150k >$150 2021 AVG 02020 AVG

Salary

Controller or Equivalent

1.74% 8.70% 16.52% 20.00% 16.52% 36.52% $134,065 $128,698

Accounting Manager or Equivalent

4.00% 28.00% 16.00% 26,67% 16.00% 9.33% $102,567 $96,129

FP&A Manager

2.17% 6.52% 4,35% 21,74% 19.57% 45,65% $139,783

N/A

AP/AR Manager

33.33% 38.27% 28.40% N/A N/A N/A $69,753

N/A

Benefits Manager

0.00% 37.04% 33.33% 29.63% N/A N/A $85,926

N/A

10 I 2021-2022 Mid-Market Talent Acquisition, Executive Compensation and Culture Study — Powered by Insperity

Short-Term Incentive (STI) Paid By Position

$50 - $100k

$100 - $150k

$150 - $250k

$250 - $500k

$500 - $1M >$1M 2021 AVG 2020 AVG

STI

<$50k

Chief Executive Officer

32.72% 8.64% 11.11% 14.20% 19.75% 9.26% 4.32% $232,310 $242,909

Chief Financial Officer

48.15% 20.99% 12.35% 11.73% 4.32% 1.85% 0.62% $105,407 $103,097

Chief Operations Officer

54.55% 21.21% 7.07% 9.09% 6.06% 0.00% 2.02% $99,141

N/A

Top Sales Executive

32.56% 24.42% 22.09% 15.12% 4.65% 1.16% 0.00% $110,552 $163,433

Top Marketing Executive

68.92% 18.92% 6.76% 2.70% 2.70% 0.00% 0.00% $52,669 $65,764

Top HR Executive

82.07% 9.66% 5.52% 1.38% 0.00% 0.69% 0.69% $43,000 $62,794

$25 - $50k

$50 - $100k

$100 - $150k

$150 - $200k

>$200 Other

STI

<$25k

2021 AVG 2020 AVG

Controller or Equivalent

61.95% 19.47% 13.27% 0.88% 0.88% 0.88% 2.65% $47,705 $29,599

Average Annual Base Pay and STI for Key Industries

Banking/ Investment Banking Investing

Construction, Engineering and Architecture

Distribution, Logistics and Warehousing

Hospital and Healthcare

Information Technology and Services

Non-Profit Professional Services

Software/ SaaS

Industry

Base Salary $545,000 $388,636 $363,889 $370,000 $277,778 $321,154 $348,333 $359,375 STI $288,750 $172,222 $438,889 $402,500 $240,278 $120,000 $272,321 $217,969 Base Salary $350,000 $225,000 $258,333 $272,500 $200,000 $288,636 $231,250 $287,500 STI $102,500 $102,500 $65,278 $220,833 $61,111 $30,556 $87,500 $166,667

Chief Executive Officer

Chief Financial Officer

Base Salary $267,857 $278,125 $267,857 $236,111

$178,125 $175,000 $245,833 $262,500

Top Operations Executive

STI

$65,714 $128,214 $216,786 $135,625 $46,250 $13,750 $98,333 $220,000

Base Salary $158,333 $217,857 $191,667 $205,000 $212,500 $200,000 $212,500 $262,500 STI $60,000 $83,750 $85,000 $245,000 $67,500 $30,833 $109,375 $225,000 Base Salary $196,429 $160,000 $162,500 $212,500 $181,250 $165,625 $187,500 $260,000 STI $65,714 $128,214 $216,286 $135,625 $46,250 $13,750 $98,333 $220,000

Top Sales Executive

Top Marketing Executive

Base Salary STI

$202,778 $154,545 $142,857 $167,500 $144,444 $139,583 $142,188 $214,583 $40,278 $25,250 $13,214 $45,278 $35,938 $11,667 $27,679 $139,545

Top HR Executive

Base Salary $154,583 $127,500 $121,667 $144,286 $125,833 $127,500 $129,375 $162,500 STI $49,583 $38,571 $27,917 $43,571 $55,000 $52,917 $30,313 $55,227 Base Salary $108,500 $110,500 $77,500 $100,000 $118,333 $93,889 $117,000 $112,250 STI Base Salary $128,333 $162,500 $65,000 $135,833 $101,250 $147,500 $154,167 $149,444 STI

Controller or Equivalent

Accounting Manager or Equivalent

FP&A Manager or Equivalent

Base Salary $58,333 $75,000 $72,143 $70,000 $56,250 $68,571

$77,500 $83,125

AP/AR Manager

STI

Base Salary $85,000 $82,500 $95,000 $100,000 $90,000 $87,500 $90,000 $75,000 STI

Benefits Manager

2021-2022 Mid-Market Talent Acquisition, Executive Compensation and Culture Study — Powered by Insperity I 11

KEY FINDINGS

2. ENTERPRISES ARE STRUGGLING TO KEEP AND FIND CRITICAL SKILLED TALENT IN THE FACE OF THE “GREAT RESIGNATION.” People—finding them, training and developing them, keeping them—has become the number-one challenge facing middle market and emerging enterprises, cited as a top concern by three in five finance and HR leaders in AchieveNEXT’s 2021 Mid-Year Update to CFO-CHRO Sentiment Study. Talent also figures into their second- and third-highest concerns—managing costs and coping with the continuing impact of Covid-19. There have been and will be many studies of what is being called “ the Great Resignation ,” the talent shortage produced by the reluctance of some people to reenter the workforce, the decision of others to leave jobs they find unsatisfying, and the insistence of many on better pay and working conditions. Explanations include worries about occupational safety, a desire or need for better work-life balance and more flexible job arrangements (partly but not only driven the challenges of childrearing when it is not clear when or whether schools will remain open or safe), Zoom fatigue and Covid burnout, and a large- scale “take-this-job-and-shove-it” rejection of jobs with few benefits or career opportunities when more attractive opportunities beckon. For example, while the pandemic affected women disproportionately in terms of income and job loss, it has also changed their terms and expectations for participating in the workforce: According to a study by the American Enterprise Institute, two in five say flexibility to balance work and family needs is one of the most important factors in choosing a job, and three in five prefer a remote-work option. Many other workers, male and female, are taking time to go to school or otherwise improve their skills. When evaluating jobs, people rank flexibility, a welcoming work environment, the opportunity to grow and advance, and work that makes a meaningful contribution to society ahead of salary. As the study’s authors say, “The unemployed are looking for work. However, they are not necessarily looking for the same jobs they had” AchieveNEXT data reveal both the problem and how elusive the solutions are. Citing talent as their top challenge, nearly half of respondents in this study say their companies lack the incentives to reduce employee turnover.

12 I 2021-2022 Mid-Market Talent Acquisition, Executive Compensation and Culture Study — Powered by Insperity

Turnover

Incentives to Reduce Employee Turnover

Incentives to Reduce Employee Turnover

0.4628571 43

0.5371428 57

46%

54%

0.4628571 43

0.5371428 57

Yes No

In this environment nearly half the middle market feels at sea, tossed and buffeted by a talent storm with and without the capabilities, processes, or partners to help them to shore. Yes No

Attracting vs. Retaining

There are meaningful differences between the difficulty of finding talent and keeping it, and also significant differences depending on an employee’s position. Most media attention has focused on hiring problems—but retention is in many respects a thornier problem. Understanding these differences is the key to finding solutions. Across the board, middle market and emerging enterprises say that finding talent is somewhat or very difficult, whether the position being filled is a senior executive or an hourly employee. The media is giving lots of attention to the scarcity of hourly workers, e.g. in hospitality and retail, but they are not where the problem is most acute. Specialist and technical workers are the hardest to find; over 40%, middle market leaders, two in five, say that finding these expert workers is very difficult, and only 3% say it is easy. While 32% say that finding top executives is very hard, a substantial number—48%—say it is easy or somewhat easy. Combining the “somewhat difficult” and “very difficult” numbers reveals that technical and specialist workers are the scarcest—79% say they are hard to attract—followed by experienced workers (69%) and middle managers (67%). Since these are the people who are toughest to find, these are the people whom it is most important to keep.

2021-2022 Mid-Market Talent Acquisition, Executive Compensation and Culture Study — Powered by Insperity I 13

Difficulty in Attracting Talent

Difficulty in Attracting Talent

10% 15% 20% 25% 30% 35% 40% 45% 50%

50%

40%

30%

20%

Easy Somewhat E Somewhat D Difficult

10%

0% 5% 0%

3-5 Years of Experi nce

Hourly Positions

Top Leadership Positions

Middle Management

Techical/ Specialist

Easy

Somewhat Easy

Somewhat Difficult

Difficult

Unfortunately, the retention data show that middle market enterprises are having trouble holding on to the very people who are hardest to replace: technical and specialist workers and people with three to five years experience, the seasoned and expert employees who get things done. Top leadership is relatively easy to keep; only 14% report any degree of difficulty. (Clearly the compensation and incentive packages described above are successful in retaining executives.) By contrast, only about 7%—just one company in fourteen— finds it easy to hold onto technical and experienced employees, and nearly 60% find it at least somewhat difficult to keep this critical talent.

Difficulty in Retaining Talent

Difficulty in Retaining Talent

0% 10% 20% 30% 40% 50% 60% 60% 40% 20% 0%

Easy Somewhat Ea Somewhat D Difficult

Top Leadership Positions

Middle Management

3-5 Years of Experi nce

Hourly Positions

Technical/ Specialist

Easy

Somewhat Easy

Somewhat Difficult

Difficult

14 I 2021-2022 Mid-Market Talent Acquisition, Executive Compensation and Culture Study — Powered by Insperity

Evidence shows that companies’ efforts to keep these talented colleagues are not working. Executives assert that staff are most likely to leave for more money, but of course they are. Almost no one leaves a job for less. But stopping the talent drain requires understanding what drives employees to look for new work or to be open to offers they might not have actively sought. Whatever the root cause, money is not the solution. A better pay/benefit package and more flexible work arrangements are in a statistical dead heat among the retention tactics companies are using, well ahead of other interventions like training and culture-improvement programs, but, as cited above, almost half of companies say that what they are doing isn’t working.

It is also noteworthy that many traditional sources of talent are less effective than two that involve networking: employee referrals and LinkedIn.

Recruiting Methods

Recruiting Methods

Retained Search Firms Contingency Search Firms Staffing Agencies Temporary Staffing Agencies College/University Career… LinkedIn Job Boards… Employee Referrals Retained Search ir s Co tingency Search ir s Staffin ies Temporary Staffing ncies Coll ge/University reer Li In Job rds Employee Referrals

Not Effective Less Effective Neutral Effective Very Effective t ffective ective tral tive ery Effective

0%

20%

40%

60%

80%

100%

0% 20% 40% 60% 80% 100%

2021-2022 Mid-Market Talent Acquisition, Executive Compensation and Culture Study — Powered by Insperity I 15

KEY FINDINGS

3. ACQUISITION AND RETENTION PROBLEMS CANNOT BE SUCCESSFULLY ADDRESSED WITH “SAME-OLD, SAME-OLD” INITIATIVES AND PROGRAMS. While middle market and emerging enterprises cannot compete dollar-for-dollar with big companies, they shouldn’t have to. Because of the acuteness and size of the talent problems, companies will need more, more innovative, and more effective approaches than throwing money at the problem; and because of their size, mid-market companies may be better able to offer compelling non-financial rewards than wealthier companies do. But they will need to be more strategic and creative than they have been in the past. Take talent development, for example. “Lack of career advancement” is the second-biggest reason employees leave (only after pay), cited by three out of five finance and HR leaders. But when asked what their companies are doing to invest in developing employees, “access to the leadership team” is far and away the most common practice, followed by mentoring. Well, so what? In a smaller company, access to the boss is table stakes and mentoring is not much more. Neither one requires any particular investment. Coaching, training, career mapping, and networking—activities that directly affect career advancement but do require investment—are far less often used.

Investments in Employee Development

Access to leadership team Mentoring Attending workshops and conferences Stretch assignments Upskilling training programs Executive coaching Networking opportunities Career mapping Other (Please specify)

73% 56% 45% 39% 37% 34% 26% 22% 3%

16 I 2021-2022 Mid-Market Talent Acquisition, Executive Compensation and Culture Study — Powered by Insperity

A similar investment shortfall shows up in the area of diversity, equity, and inclusion. More and more mid- market companies have inaugurated DE&I programs, recognizing the business and moral imperative of a diverse workforce and inclusive culture, the value of expanded talent pools, the premium younger employees place on working in diverse companies, the need to serve an increasingly diverse customer base, and the growing diversity of the communities in which they operate. So far, however, these programs mostly emphasize the first stage of the employee life-cycle, recruiting and hiring, and are much less likely to address problems and opportunities once diverse employees come on board. For example, respondents say they are one-third less likely to extend DE&I work into succession planning.

“An integrated, comprehensive DE&I initiative is a key component to addressing the significant attrition issues many enterprises are currently facing. Beyond being responsive to the current cultural climate, enterprises with a demonstrated commitment to DE&I are able to attract - and then retain - employees from new talent pools (particularly Millennials and Gen Z, women, and those that are diverse) who are specifically looking for enterprise cultures where they can feel valued, supported, and authentic.”

— Robyn Pollack, Executive Managing Director at AchieveNEXT

DE&I Strategies Where mid-market enterprises are applying DE&I efforts: What DE&I Covers Share of DE&I programs that address:

Succession Planning

Successio Planning

Leadership Development Leadership Development

Talent Development

Talent Development

Talent Acquisition

Talent Acquisition

0%

10%

20%

30%

40%

50%

60%

2021-2022 Mid-Market Talent Acquisition, Executive Compensation and Culture Study — Powered by Insperity I 17

Short-Term Incentive (STI) Paid By Position

9 <$10 MM $10 - $50 MM

$51 - $250 MM

$251 - $500 MM

$501 - $1 BN

Enterprise Revenue

>$1 BN

Controller or Equivalent

32%

56%

78%

78%

50%

80%

FP&A Manager

9%

19%

34%

44%

25%

20%

Finance Department

21%

32%

48%

67%

50%

60%

Accounting Manager or Equivalent

AP/AR Manager

24%

42%

50%

61%

56%

33%

HR Manager

12%

19%

26%

56%

50%

40%

HR Department

Benefits Manager

9%

6%

14%

33%

50%

40%

Finance and HR are staffed for basic tasks.

One possible explanation of the passive approach to career development taken by mid-market and emerging enterprises is that they are not staffed to deliver more. Both the finance and human resources functions are thinly staffed, especially in the lower middle market, expanding slowly as companies grow. Cost is clearly an issue. Average base salaries for a finance leadership team of CFO, Controller, Accounting Manager, FP&A Manager, and AP/AP total $532,000, not counting incentives or the cost of lower level bookkeepers, analysts, and the like. Even more than finance, HR departments lack specialist skills, particularly in benefits design, that might help companies address talent issues. Culture enhancements, like DE&I, leadership development, and succession planning, are hard for them to field with internal resources. Finance, too, is staffed best for the basic tasks of accounting and managing cash, and generally less likely to be able to provide financial planning and analysis or other sophisticated modeling and analytics, including talent analytics.

18 I 2021-2022 Mid-Market Talent Acquisition, Executive Compensation and Culture Study — Powered by Insperity

KEY FINDINGS

4. MID-MARKET AND EMERGING ENTERPRISES NEED TO REIMAGINE EMPLOYEE VALUE PROPOSITION TO SUPPORT GROWTH. The fact that talent acquisition and retention are most difficult in the technical and middle ranks of enterprises points out the need for talent and culture solutions that will make the most difference to those employees— people who, because of their expertise and experience, are critical to the execution of enterprise strategy. While senior leadership and investors are obviously key to setting strategy and direction and providing the capital to support it, a strategy-execution gap will open and widen in the absence of superior, engaged, and tenured human capital to carry it out, whether in sales, operations, marketing, or back-office roles.

Executives in mid market firms point to three kinds of initiatives and action that can help arm companies to prevail in the war for talent: • Executive coaching that produces better bosses and improves employee experience and performance • Learning and development programs, accompanied by career mapping and succession planning, that excite and educate mid- level employees • Culture change that expands talent pools and releases new energy among current employees and powers recruitment The value of these actions are confirmed by our own experience and that of our partners, as well as dialogues and conversations in the CFO and CHRO Alliance peer networks. Build Better Bosses Investing in the quality and capabilities of management is not generally thought of as a tactic to attract and retain talent. Yet data from Gallup and others has long shown that bad managers

“The numbers are clear: companies want leaders who think clearly about the business and use their insights to coach people up rather than dictate down. When executives see themselves as coaches, they are 50%+ more effective at keeping the best players on their team. When they don’t, they invite another leader and another company to hire them away.” — Eric Herrenkohl, Managing Director of Executive Coaching and Executive Career Services, AchieveNEXT

are a major—some studies show the major—reason people leave companies. Finance and HR leaders in the mid-market agree that so-called “soft skills” are the ones most urgently needed in their leadership ranks. Communication skill is nearly five time more likely to be ranked as a top leadership-development priority than financial acumen is, for example. These companies too often rely on experience as the only teacher for their executive management, overlooking the value of coaching, networking, and other outside sources of knowledge. Better managers are a lever that helps retain those elusive and valuable specialist/technicians and the experienced workers on which you depend—and also an essential element in helping them do their best work. 2021-2022 Mid-Market Talent Acquisition, Executive Compensation and Culture Study — Powered by Insperity I 19

Important Leadership Competencies

Important Leadership Competencies

Communication Com unication

60% 47% 38% 29%

Critical Thinking Critical Thinking

Emotional Intelligence/Empathy Emoti nal Intelligence/Empathy

Agility/Change Management Agility/Change Man gement

13% 8% 4%

Financial acumen Fina cial cumen

Conflict Resolution Conflict Resolution

Inclusion

Inclusion

Develop the Workforce

Learning and development mustn’t be confined to managerial and leadership roles. A lack of career development is the second-most-cited reason people leave companies, yet only about a third of mid- market and emerging enterprises include upskilling in their kit of talent-planning tools; they are almost as likely to hire contractors and temps as to invest in the development of their own people.

Talent Planning Initiatives

Talent-Planning Initiatives

59%

Offering more fl exible working arrangements Increasing pay and benefi ts Upskilling existing workforce Address culture issues Hiring temps and contractors Hiring diverse talent Automation to reduce the need for workers Hiring bonuses Outsourcing of non-core functions None O ering mor i r ange ents r si nd benefits i i g orkforce dres c lture is ues c tractors iri g iverse talent Automatio t f r workers Hiring bonuses ut i f - re functions None

57%

33%

31% 31%

25%

23%

20%

14%

9%

0% 10% 20% 30% 40% 50% 60% 70% 0% 10% 20% 30% 40% 50% 60% 70%

20 I 2021-2022 Mid-Market Talent Acquisition, Executive Compensation and Culture Study — Powered by Insperity

Well-designed learning and development programs pay for themselves before taking into account the savings from reduced attrition, recruiting, and onboarding costs.

Even in companies without formal learning and development programs, career mapping provides a valuable retention tool, because it allows employees to see what their future at the company can be and to take steps on their own, or with the support of their newly emotionally-intelligent boss, to prepare themselves for bigger and better things in the company. Just 22% — fewer than one in four — have done the work to map career paths; yet creating visible career paths should be an area where mid-sized companies can claim a competitive advantage over big companies — not because they hand handfuls of promotions to pass out, but because they can make the road to success more visible and less impersonal, giving each employee agency in his or her own future. Address Cultural Issues Mid-market and emerging enterprises ought also to have an edge in culture, because their teams are close-knit and they are less likely to have competing tribal cultures—sales vs. marketing, HQ vs. branch offices, staff vs. line, core vs. skunkworks—than big businesses are. But culture needs tending. About three out of ten finance and HR executives call out culture as one of the top reasons for employee attrition, and an equal share say that they are addressing culture issues as part of their talent strategy. It makes sense. If employee referrals and social networks are the most effective ways to attract talent, then the engagement and experience of current employees is a crucial element of your employer brand and value proposition. In addition, a positive culture that supports diversity, equity, and inclusion can give enterprises access to pools of talent that have not been overfished.

“The value of an investment in the workforce starts with productivity, but it is much greater than that. When people feel they are learning and growing, their engagement and loyalty increase, too.” — Milton Corsey, Managing Director of Executive Coaching and Executive Career Services, AchieveNEXT

2021-2022 Mid-Market Talent Acquisition, Executive Compensation and Culture Study — Powered by Insperity I 21

CONCLUSION: IT’S TIME FOR FINANCE AND HR TO WORK TOGETHER TO TRANSFORM PERFORMANCE. With more job openings than available job seekers, work and a workforce disrupted by the pandemic, and management and leadership struggling with how to define culture and drive employee engagement each day, it has become imperative that finance and HR leaders work together as never before. HR’s skills in job design and organizational psychology and finance’s ability to use data and numbers complement each other perfectly. Together, finance and HR can lead their enterprise efforts to win the war for talent. While many will argue that the CEO must ultimately lead this effort, or that the HR team must be responsible for the success or failure in this endeavor, the data captured from this survey, coupled with the insights shared by finance and HR leaders from across North America who participate in the CFO and CHRO Alliance Peer Advisory Networks, make it clear that if finance and HR leaders work together — in tandem — that they can effectively serve as Chief Performance Officers , and lead the search for people inside and outside their enterprises who could be future value creators and determine how to release their talent. Capital and human capital — together at last. Given all of what 2020-2021 has forced upon finance and HR leaders, their C-suite colleagues and their emerging and mid-market enterprises, it is clear that CFOs and CHROs, together, must identify the key business drivers and human and financial resources that individuals, teams, and enterprises need to bring performance to the next level. Together, they can multiply the impacts of their efforts, not just add them. Advances in digital capabilities and disruptive technologies are challenging fundamental talent norms in many businesses, industries and markets, resulting in the continuing evolution of both the CFO and CHRO roles in building and assigning talent, especially key people, and working to unleash their enterprise’s energy. Given the current competitive environment, most finance and HR leaders would agree that managing human capital must now be accorded the same priority that managing financial capital came to have decades ago.

22 I 2021-2022 Mid-Market Talent Acquisition, Executive Compensation and Culture Study — Powered by Insperity

This Chief Performance Officer (CPO) role extends beyond the traditional CFO and CHRO skill-sets and demands additional complex responsibilities, as it contains both traditional finance and HR responsibilities, along with requirements of the enterprise strategic agenda and the need to: 1. Provide insightful and predictive analysis and reporting focused on delivering intended business and financial outcomes, 2. Execute and manage the productivity, processes and performance, 3. Ensure that financial and human capital area available and correctly allocated, 4. Build resilience and agility into the financial and human systems of the enterprise, and most importantly, 5. Recast both HR and finance as value creators, moving beyond accounting and transactional activities to actions that truly affect business performance — revenue, profit margin, brand value, and market share. As this CPO role stretches into productivity and transformational efficiencies, there will be a real need for finance and HR to deal with the inevitable disruption such efforts can cause. Most critical in this effort, CFOs and CHROs must ensure that the short and long-term skills, capabilities, and resources are ready as and when required.

Because an enterprise’s performance depends largely on the fit between people and jobs, the CFO and CHRO, together, can crystallize what particular roles are needed and what talent is required to fill them.

If the CFO and CHRO together play this CPO role, they will face a number of hurdles– many of which have their origin in data, knowledge, and information management. The key questions include: • How do they harness the mass of data now available to enterprises and synthesize it into meaningful, insightful and useful information? • How do they efficiently integrate the internal enterprise data with the vast quantities of customer and economic data flowing outside the enterprise? • How do they become the internal data-information-knowledge champions and effective providers of insights when each executive and functional leader will feel the right to own their portion of the data? While these are not easy hurdles to overcome, we believe that the right discussions, research, and best-practice sharing can help the leaders of finance and HR leaders, along with their teams and enterprises, drive this performance effort forward, with purpose and commitment to achieving the next level of growth and results. Contact AchieveNEXT or Insperity to learn more. 2021-2022 Mid-Market Talent Acquisition, Executive Compensation and Culture Study — Powered by Insperity I 23

© 2021 AchieveNEXT. All rights reserved.

Page 1 Page 2 Page 3 Page 4 Page 5 Page 6 Page 7 Page 8 Page 9 Page 10 Page 11 Page 12 Page 13 Page 14 Page 15 Page 16 Page 17 Page 18 Page 19 Page 20 Page 21 Page 22 Page 23 Page 24

Made with FlippingBook Learn more on our blog