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One Firm. Complete Solutions.

Radford Technology Forum

Germany Villa Kennedy, Frankfurt, 13 September 2013

Robert Miller, Partner

Yves Corne, Global Benefits

Patrick Gutmann, Director DACH

Axel Schuette, Associate Director EMEA

Anton Marinovich, Director Sales EMEA

1 | Radford Technology Forum Frankfurt 2013

Welcome and Introductions


Agenda

09:30 – 10:00 Arrival and Coffee

10:00 – 10:15 Welcome and Introductions

10:15 – 11:00 Radford News, Facts and Trends

11:00 – 11:15 Networking Break

11:15 – 12:00 Guest Speaker: 1&1 Internet AG

12:00 – 13:00 Lunch Buffet and Networking

13:00 – 13:45 Total Rewards

13:45 – 14:30 Compensation Trends in Technology Sectors

14:30 – 14:45 Break and Networking

14:45 – 15:50 Roundtable Discussion

15:50 – 16:00 Wrap-up and Closing


Today´s Participants

1&1 Internet AG

Accenture

Agilent Technologies

Alstom Germany

Arrow Electronics

Carl Zeiss AG

Cassidian Cybersecurity

COVIDIEN

CSC

Dell GmbH

DB Systel GmbH

Deutsche Bahn AG

Deutsche Post AG DPDHL

Digi International GmbH

First Data

Holtzbrinck Publishing

Group

HomeAway Deutschland

GmbH

Honeywell International

IBM Deutschland

IHS Global

Masdar PV GmbH

Rimage Europe GmbH

SAP AG

SNP Schneider-Neureither

Partner AG

Software AG

SunGard Systeme GmbH

TE Connectivity

Texas Instruments

Yahoo! Europe


About Radford

Surveys. Consulting. Valuation.

Radford, an Aon Hewitt company, is the leading global provider of compensation intelligence and consulting services to the technology and life sciences sectors. Our market-leading surveys, strategic consulting and equity valuation expertise help Compensation Committees and human resources leaders address their toughest challenge: attracting, engaging and retaining talent in innovation-based industries. Radford offers clients a comprehensive suite of solutions, integrating unmatched global data capabilities with high-powered analytics and deep consulting expertise to deliver market-leading guidance to more than 2,500 organizations annually— from Fortune 10 companies to start-ups. Headquartered in San Jose, CA, Radford has professionals in Bangalore, Beijing, Boston, Brussels, Frankfurt, Hong Kong, London, Philadelphia, San Francisco, San Diego, Shanghai and Singapore.


About Our Surveys

Radford Surveys

Consistent methodology globally - single input across all countries to provide solutions for a more streamlined global survey participation process

High international growth accelerated by the Aon Hewitt integration, currently partnering with AH China, Australia, India to collect and report more robust data for APAC

Radford Network® offers access to compensation data, company practices by country and quarterly Trends Reports for selected countries

- Covers full spectrum of compensation elements; base, STI, LTI and allowances, for all positions and levels of employees globally

- Updated survey results, three times a year, allows companies to join throughout the year, collects company’s most recent pay data

- Custom reports available to reflect company’s peer groups; customise by business unit, level within organisation; execs, manufacturing, etc.

5


Our Global Network

Radford +

As part of Aon Hewitt, Radford is uniquely positioned to address a wide range of needs for companies at all stages of development around the globe.

The merging of numerous industry leaders under Aon Hewitt generates a powerhouse firm focused on empowering people and companies.

Radford routinely works on behalf of its clients to leverage the combined strength of the Aon Hewitt companies, including:

Aon Hewitt empowers organizations and individuals to secure a better future through innovative talent, retirement and health solutions.

McLagan is the leading performance/reward consulting and benchmarking firm for the financial services industry.

Ward is the leading provider of benchmarking and best practices research studies for insurance companies.

New Bridge Street is the leading provider of remuneration consulting services in the UK market, serving over one-third of the FTSE 350.

Birches Group serves as a key partner to the Aon Hewitt family of companies, providing compensation expertise and intelligence in critical emerging markets.


Radford EMEA team update

Robert Miller

Partner

Region Head

Guy Pritchard

Associate Partner

Consulting

Gina Wellmaker

Associate Partner

Surveys

Patrick Gutmann

Director

DACH

Axel Schuette

Associate Director

DACH

Brenda De Souza

Associate Director

Technology Lead

Gaurav Dutt

Associate Director James Seechurn

Consultant

Stefanie Verberckt

Senior Survey

Consultant

Life Sciences

Elena Finotti

Senior Survey

Consultant

Life Sciences

Nikolaos

Tsimogiannis

Survey Consultant

Technology

Deb Chang

Survey Consultant

Technology

Katie Aldred

Survey Consultant

Technology

Bart Schoofs

Associate Director

Life Sciences


Continued Growth of Radford’s Global Technology Survey

Number of datasets has grown by more than 50% in only five years

3.2

3.6

4.4

4.8

5.3

1,700

0

500

1,000

1,500

2,000

2,500

0.0

1.0

2.0

3.0

4.0

5.0

6.0

2009 2010 2011 2012 2013

No

. o

f c

om

pa

nie

s

No

. o

f in

cu

mb

en

ts

Millio

ns

No. of incumbents No. of companies Column1

Source: Radford Global Technology Survey, July publication


We are Actively Soliciting New Participants

A selection of companies who recently joined our survey

AB SCIEX

ALLIANCE DATA

SYSTEMS

AVG TECHNOLOGIES

AVNET

BAXTER HEALTHCARE

BOSTON SCIENTIFIC

CAREFUSION

CARL ZEISS AG

COGNIZANT

COLT TECHNOLOGY

COMMVAULT SYS.

COOPERVISION

EDWARDS LTD

FUJITSU

GE HEALTHCARE

GROUPON

HAEMONETICS

HOLLISTER

KINETIC CONCEPTS

LEBARA LTD

LINKEDIN

LIQUIDITY SERVICES

MITEL NETWORKS

MONSTER WORLDWIDE

NSN

OPENTABLE

QIAGEN

ROCHE DIAGNOSTICS

SPLUNK

STMICROELECTRONICS

VERIFONE

VISA EUROPE


Radford Client Events in EMEA

2013 Radford EMEA Events Location Date

EMEA Telecoms Forum London 15 March

Middle East Forum Dubai 21 March

Reward Forum Paris 26 March

Reward Forum Munich 12 April

EMEA Software Forum London 18 April

EMEA e-Commerce/Online Community Forum London 14 May

European Life Science Exchange Group Forum Geneva 5 June

Reward Forum Frankfurt 13 September

European Steering Group Meeting London 19 September

EMEA Regional Meeting London 16 October

Regional Technology Forum Dubai 20 October

EMEA Medical Devices Forum Brussels 14 November 2013


New Initiatives

New Analytics Engine: Radford’s Global Workforce Analytics (GWA)

initiative responds to a critical business need: effectively linking

organizational and staffing strategies to labor costs, with the overall

goal of enhancing the global return on people

Total Rewards: Combined capabilities of Radford and Aon Hewitt give

clients a comprehensive, value-based approach for benchmarking total

rewards packages relative to the market

12 | Radford Technology Forum Frankfurt 2013 12

Setting the Stage (morning session)


Economic Forecast: GDP Year-Over-Year

Source: International Monetary Fund, World Economic Outlook Database, April 2013

The advanced economies are expected to gradually accelerate, following a weak start to 2013,

with the US in the lead. In emerging markets and developing economies, activity has already

picked up steam

In the short term, risks mainly relate to developments in the euro area, including uncertainty about

the fallout from events in Cyprus and politics in Italy as well as vulnerabilities in the periphery

Country 2012 2013 2014 Trend 2012

to 2013 Trend 2013

to 2014

France 0,0 -0,1 0,9

Germany 0,9 0,6 1,5

Italy -2,4 -1,5 0,5

Poland 2,0 1,3 2,2

United Kingdom 0,2 0,7 1,5

United States 2,2 1,9 3,0

China 7,8 8,0 8,2

World 3,2 3,3 4,0

Advanced Economies 1,2 1,2 2,2

Ermerging Markets 5,1 5,3 5,7


Economic Forecast: Unemployment Rate

Unemployment rates have increased in the main European economies, whereas

the US shows slow improvement and China remains stable at a low rate

The 2014 outlook shows little improvement and includes a downgraded expectation

for Italy and France

Country 2012 2013 2014 Trend 2012

to 2013 Trend 2013

to 2014

France 10,2 11,2 11,6

Germany 5,5 5,7 5,6

Italy 10,6 12,0 12,4

Poland 10,3 11,0 11,0



China 4,1 4,1 4,1



Economic Forecast: Inflation Rate

Overall inflation has stayed remarkably stable in advanced economies and will

continue to do so in 2014

Country 2012 2013 2014 Trend 2012

to 2013 Trend 2013

to 2014

France 2,0 1,6 1,5

Germany 2,1 1,6 1,7

Italy 3,3 2,0 1,4

Poland 3,7 1,9 2,0



China 2,7 3,0 3,0

World 3,9 3,8 3,8

Advanced Economies 2,0 1,7 2,0

Ermerging Markets 5,9 5,9 5,6



AVG Turnover Rates

Source: Radford Trends Report – July 2013

Turnover rates at technology sector companies in Europe are relatively low

compared to the US or China

5.1% 5.6% 5.2% 5.1% 6.3% 5.6%

3.9% 4.1%

6.9% 8.1%

4.5% 5.5%

7.5%

9.2%

6.8% 6.5%

10.1% 9.6%

8.6% 9.7%

10.8%

11.4%

16.3% 13.2%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

2012 2013 2012 2013 2012 2013 2012 2013 2012 2013 2012 2013

Germany France United Kingdom Poland United States China

Involuntary Voluntary

◄ Region | Abroad►


Average Turnover Rates - Germany

Analyzing details is showing us significant differences in turnover rates Germany for the different sub-sectors


8.1%

13.3%

8.9% 7.7%

5.9% 5.7% 7.1%

10.3%

8.3%

10.1%

4.8%

5.2%

4.2% 4.3% 3.1%

2.9%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

2012 2013 2012 2013 2012 2013 2012 2013

Internet Software Semicon MedDev

Voluntary InvoluntarySource: Radford Trends Report – July 2013


Hiring Sentiment


The European hiring environment is dominated by selective to normal hiring; freezing

levels are the lowest in Germany and UK

US and China have been more aggressive in hiring but China appears to be falling in

line with the others in 2013

5% 6% 7% 8% 5% 6% 8% 8% 2% 3% 1% 3%

30% 35% 32% 34%

33% 36%

25% 26%

29% 29% 29% 33%

59% 52% 57% 55%

54% 50%

59% 56%

49% 50% 56%

56%

6% 7% 4% 4% 8% 8% 8% 10%

20% 18% 14%

8%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2012 2013 2012 2013 2012 2013 2012 2013 2012 2013 2012 2013

Germany France United Kingdom Poland United States China

Freeze % Selective % Normal % Aggressive %Source: Radford Trends Report – July 2013


3% 2% 0%

10% 15%

7%

22% 22% 25%

25%

43%

48%

29%

43%

62% 61%

67% 70%

45%

36%

62% 43%

16% 14%

5% 5% 2% 1% 1%

9%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2012 2013 2012 2013 2012 2013 2012 2013

Internet Software Semincon MedDev

Freeze % Selective % Normal % Aggressive %

Hiring Sentiment – Germany per Sector

The German internet sector is more aggressive in hiring compared to other technology

industries whereas the semiconductor sector is much more conservative



AVG Salary Increase – Undiluted (Region)

2012-2013 European salary budgets and actual salary increases are generally stable or

decreasing whereas China is seeing increases even if limited

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

9.0%

10.0%

2012 2013 2012 2013 2012 2013 2012 2013 2012 2013 2012 2013 2012 2013

Germany France Italy United Kingdom Poland United States China

Budget - Overall Actual - Overall




AVG Salary Increase – Undiluted (Germany)

Germany Details for Non-Sales Positions

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%

2012 2013 2012 2013 2012 2013 2012 2013

Internet Software Semiconductor MedDev

Germany

Budget - Overall Actual - OverallSource: Radford Trends Report – July 2013


1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%

2012 2013 2012 2013 2012 2013 2012 2013

Internet Software Semiconductor MedDev

Germany

Budget - Overall - Sales Actual - Overall - Sales

AVG Salary Increase – Undiluted (Germany)

Germany Details for Sales Positions



Bonus Eligibility per Level and Industry in Germany

Across sectors, bonus eligibility looks very similar at senior management levels. For

lower level employees there are much bigger differences in the sectors

In general, the software Industry tends to operate more extensively with incentives

whereas medical devices companies seem to be more conservative

Source: Radford Global Technology Survey - July 2013

Employee

Levels Hardware Medical

Devices Semicon

Equipment Software

Survey

Totals in

Germany

VP and above 100% 100% 100% 100% 98%

Director 99% 96% 98% 95% 93%

Manager 91% 86% 94% 90% 93%

Supervisor 84% 66% 75% 91% 75%

Expert/Principal 99% 96% 95% 96% 97%

Career/Advanced 75% 86% 76% 90% 82%

Entry/Developing 73% 39% 67% 85% 73%

Support 68% 30% 75% 82% 64%


70% 67%

92% 91% 84% 83%

79% 76%

30% 33%

8% 9% 16% 17%

21% 24%

0%

20%

40%

60%

80%

100%

Executive - Level7 - All Functions

Roll-Up

Executive - Level8 - All Functions

Roll-Up

Management -All Functions

Roll-Up 1


Roll-Up 2


Roll-Up 3


Roll-Up 4


Roll-Up 5


Roll-Up 6Base% Target STI %

Non Sales Pay Mix – Base Salary and Target STI

Source: Radford Global Technology Survey Germany – July 2013

For non-sales roles the pay mix is more base salary focused

This analysis is based on roll-ups

◄ Executives | Management►


63% 61%

71% 69% 67% 67% 64%

37% 39%

29% 31% 33% 33% 36%

0%

20%

40%

60%

80%

100%

Sales Executive -VP Level

Sales Executive -SVP Level

Field Sales Mgmt -Supervisor - Roll-

Up

Field Sales Mgmt -Manager - Roll-Up

Field Sales Mgmt -Senior Manager -

Roll-Up

Field Sales Mgmt -Director - Roll-Up

Field Sales Mgmt -Senior Director -

Roll-Up

Base % Target %

Sales Positions Pay Mix – Base Salary and Target STI

For sales roles the pay mix is less base salary focused


◄ Executives | Management►



Non Sales Pay Mix – Base Salary and Target STI

For non-sales roles the pay mix is more base salary focused


◄ Professional | Support►

92% 89% 87% 84% 78%

92% 92% 92% 92%

8% 11% 13% 16% 22%

8% 8% 8% 8%

0%

20%

40%

60%

80%

100%

Professional -All Functions

Roll-Up 2


Roll-Up 3


Roll-Up 4


Roll-Up 5


Roll-Up 6

Support - AllFunctions Roll-

Up 2


Up 3


Up 4


Up 5

Base% Target STI %Source: Radford Global Technology Survey Germany – July 2013


76% 69% 69% 66% 63%

73% 69% 70%

25% 31% 31% 34% 37%

28% 32% 30%

0%

20%

40%

60%

80%

100%

Sales AcctManager - Tech+ Med Device -All Channels -Entry - Roll-Up

Sales AcctManager - Tech+ Med Device -All Channels -Developing -

Roll-Up

Sales AcctManager - Tech+ Med Device -All Channels -

Career - Roll-Up


Advanced - Roll-Up


Expert - Roll-Up

Inside/ContractRenewal Sales

Rep 2


Rep 3


Rep 4

Base % Target %

Sales Positions Pay Mix – Base Salary and Target STI

For sales roles the pay mix is less base salary focused


◄ Professional | Support►



Germany Market Movement

Survey totals 2013 vs. 2012:

Source: Radford Global Technology Survey - July 2013 and July 2012

Category Job Level

Base

Salary

Total

Cash

Total

Cash at

Target

Employee

count

Company

count

Management

1-2 103% 103% 103% 153% 116%

3-4 102% 110% 103% 114% 114%

5-6 102% 105% 103% 139% 130%

Professional

1-2 99% 100% 102% 117% 108%

3-4 101% 104% 102% 104% 110%

5-6 96% 106% 102% 151% 111%


Germany Market Movement

Same company comparison 2013 vs. 2012:

Source: Radford Global Technology Survey - July 2013 and July 2012

Category Job Level

Base

Salary Total Cash

Total Cash

at Target

Management

1-2 105% 105% 105%

3-4 102% 111% 103%

5-6 103% 107% 104%

Professional

1-2 100% 101% 103%

3-4 100% 104% 102%

5-6 100% 112% 106%


Cost of Executive Management

Executive vs. Global Headcount

As a percentage of global headcount, executive teams represent less than 1% of the total employee population at larger companies and less than 2% of the population at smaller companies

Yet, we continue to focus a significant amount of time and resources devoted solely to executive compensation

0.8%

1.4%

1.9%

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

Executives as a % of Global Headcount (<$4B in Revenue)

25th 50th 75th

0.4%

0.7%

1.1%

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

Executives as a % of Global Headcount (>$4B in Revenue)

25th 50th 75th

Source: Radford Global Workforce Analytics (GWA) Database – July 2013



How Did We Calculate That?

In 2012, Radford asked a select group of leading technology firms to provide full census survey data (i.e., all employees in all locations)

As a result of this effort, a new tool was born: Radford’s Global Workforce Analytics (GWA) database

Featuring 95 participants so far, GWA enables clients to explore key business metrics, such as total cost of management, across industries and companies of different sizes


Key Metrics

<$4B in Revenue

(Lower Half of Dataset)

>$4B in Revenue

(Upper Half of Dataset)

25th 50th 75th 25th 50th 75th

Annual Revenue ($M) $702 $1,183 $2,192 $4,510 $8,234 $31,533

Global Headcount 2,100 3,800 6,400 11,200 20,600 65,200

Revenue Per EE ($K) $259 $341 $432 $334 $474 $670



The Focus Becomes Clearer

While executives represent less than 2% of the population, the cost of compensating executives is 5% to 10% of total compensation spend (a 5x to 6x multiple on the percent of headcount executives represent)

When you spend that much money on such a small employee group, you want to make sure you get it right


6.4%

8.8%

12.3%

0.0%

5.0%

10.0%

15.0%

Executive Pay as a % of Global TDC (<$4B in Revenue)

25th 50th 75th

4.2%

6.9% 8.1%

0.0%

5.0%

10.0%

15.0%

Executive Pay as a % of Global TDC (>$4B in Revenue)

25th 50th 75th



Exploring The Financial Impact

Other interesting items we can now review include examining executive pay as a percentage of revenue or earnings

For example, executive pay among the existing GWA dataset has an average impact on EPS (earnings per share) of $0.15 for large companies and $0.21 for small companies


1.9%

0.7%

2.8%

1.2%

4.0%

1.7%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

GWA Lower Half GWA Upper Half

Executive Pay as a % of Global Revenue

25th 50th 75th

$0.21

$0.15

$0.00

$0.05

$0.10

$0.15

$0.20

$0.25

Average Impact of Executive Pay on EPS

GWA Lower Half GWA Upper Half


Summary

Cash Compensation:

Merit increase budgets remain at the 3% to 3.5% level – a new normal

Adjustment and promotion budgets become critical to recognize performance and reward key talent

Nearly all employees will receive a bonus – this challenges the ability to spend more on top talent

A focus on global staffing and people spend among big tech firms

Sector Trends:

Strong hiring sentiment at internet and e-commerce in Germany drives pressure at companies to retain and attract top talent

Lower salary budgets follow weak business outlook in German semiconductor market in 2012/2013

Talent and Market Factors:

Top talent programs are still a minority practice, but in today’s competitive talent market, they are becoming increasingly crucial and valuable

Though many companies offer similar programs, it is more about how your company executes its talent program, and of course, the real (and perceived) values it returns to the employee

Hiring drives increased voluntary turnover - there are always opportunities for top talent


1&1 Internet AG By David Thür and Wibke von Agris


Total Rewards Analytics By Robert Miller and Yves Corne


Total Rewards – Proposition/Communication

Total Reward broadly: “Everything an employee gets and perceives as valuable or rewarding”

Total Rewards Framework Sample Total Reward Statement


Aon Hewitt Total Reward Study 2012

Aon Hewitt conducted a global Total Reward Study in 2012 with 750 participants

Key survey highlights include:

Only 35% of companies state that Total Reward strategy is based on sound assumptions and data

Only 27% of organizations regularly measuring the effectiveness of Total Reward programs

86% of organizations see cost as the most important factor when making Total Reward decisions

87% of organizations think it is critical to align TR strategy with business strategy

Only 56% of organizations are actually aligning TR strategy with business strategy though

Why do only 87% of organizations think it is important to align TR and business strategies?

Only 46% of organizations think it is important to gather facts before making TR decisions

With only 28% of companies actually gathering data round TR spend

Why are so few companies gathering facts and data before taking decisions?


Employee Value Proposition

What are you doing to differentiate as a top employer?

Employment Proposition

Benefits Fixed Compensation Variable Cash Equity Career

▼ Cafeteria subsidy

Company transport

Health and well being

Educational assistance

Vacation

Retirement

Concierge offerings (e.g.,

pet, elder)

Fitness services

▼ Housing allowances

Medical Reimbursement

Company car

Other/Special Allowances

Profit

Sharing Bonuses

Options/

SARs Promotions

RSUs Training

Cash Flexibility

Innovation

Leadership

What is it costing you?


Changes in Total Rewards Landscape

1. Catching Up

− Creating a strategy

− Aligning leadership

− Addressing structure and culture

2. Moving Forward

− Centralizing responsibility for reward strategy

− Pushing for more tailored approaches

− Increasing performance orientation & differentiation

− Shifting cost and risk to employees

− Pushing for better communication

3. Pulling Ahead

− Getting a clearer sight on benchmarking and cost

− Using total rewards as a differentiator

Companies Operating in 1 of 3 Modes Respondents Expect to See

LESS… Respondents Expect to See

MORE…

Decentralized approached to

rewards Centralized approached to

rewards

One-size-fits-all approaches to

rewards Customized reward programs

Rewards being managed

element by element Rewards being managed as a

portfolio

No choice offered Individual choice

Same rewards for all Differentiated rewards based on

performance

Reward linked to company-wide

results Rewards tied to individual

performance

Rewards based on results and

effort Rewards based on results only

Company bearing cost and risk

in reward programs Employee bearing cost and risk

in reward programs

"Need to know" mentality driving

communication Open communication about

rewards

Trends to come out of the Total Rewards Survey include:


Total Rewards – Understanding The Costs

Mandatory and Supplementary Benefits form a significant component of Total Reward Spend

Organizations invest significant time in understanding the salary components

− But very little time on the cost of the benefit components

Mandatory costs proportionally very high in emerging markets – with exposure to regulation change

0

20

40

60

80

100

120

140

160

180

Belgium China Hong Kong India Singapore UK

Total Reward Components – Proportion of Base Pay

Base Pay Market incentive Mandatory Benefits Supplementary Benefits

Source: “Aon Hewitt Hot Topic Survey 2013”


Total Rewards Analytics

Aon Hewitt compensation and

benefit databases

Radford GTS and GSS databases

Total Reward studies and

pioneering work

AN

ALY

TIC

S

Quantitative TR

benchmarking

Simulate TR

spending and

budgeting

Individual TR

analysis

TR component

modelling

Foundations 1

Tools /

Technology 2

Actuarial methodology

Compensation position

modelling

Dynamic reporting

Aon Hewitt and Radford partnering more closely to tackle emerging Total Reward needs

Leveraging databases, tools and technology to bring detailed analytics to market


Complete Global Assessments

Base Salary/

Fixed

Compensation

Annualised base salary plus fixed

or guaranteed allowances

Annual Cash

Incentives

Target and/or actual variable cash

incentives

Equity/Long-Term

Awards

Annualized stock grants and values

from employee stock purchase

plans

Mandatory and

Market Benefits

Retirement, healthcare, insured

benefits, paid time off, and

perquisites

Combined capabilities of Radford and Aon Hewitt give clients a comprehensive, value-based approach for benchmarking total rewards packages relative to the market

By merging Radford’s compensation intelligence with extensive benefits data and market-leading actuarial valuation techniques from Aon Hewitt, we can provide a truly unique total rewards perspective

Results are available on a global to individual incumbent view


Dynamic Benchmarking Workbooks

Total rewards deliverables from Radford and Aon Hewitt feature dynamic,

Excel-based benchmarking workbooks to help clients customize and leverage

results across their organization.

95.0% 85.0%

110.0%

90.0% 93.0%

0%

20%

40%

60%

80%

100%

120%

Base Variable Equity Benefits Total

Total Rewards Benchmarking

(You as % of Market)

Base Salary 1,000,000

Benefits 700,000

Variable 200,000

Equity 100,000

Total Rewards Value

Country: Function: Percentile:

Germany ▼ Product Development ▼ 50th ▼


Total Rewards Roll-Up Tool

ABC Co. Total Rewards AnalysisCustom Dynamic Data Display Tool

Choose Target Versus Actual Total Cash

Target TC (2013) Choose Target or Actual Total Cash

Select Reporting Filters

Choose Country Choose Service Category Choose Incentive Category

Choose Business Organization Choose Review Rating Choose Function

Choose Age Category Choose Sex

Exec Sr Mgr Mgr Sr Indiv Indiv All Levels

EXE SM IM/OM ICB ICA All Levels

2013 Base 101% 107% 108% 104% 104% 105%

Target Variable 106% 144% 84% 98% 209% 104%

Target Total Cash 103% 115% 104% 103% 108% 105%

Equity (incl. ESPP) 111% 64% 61% 35% 38% 60%

Total Cash & Equity 105% 108% 100% 99% 107% 101%

Benefits 95% 99% 103% 98% 99% 99%

Total Rewards 104% 106% 101% 98% 105% 100%

ABC Co. as a Percent of Market Median

United States

-- All --

-- All --

-- All --

-- All --

-- All --

-- All --

-- All --

101%107% 108% 104% 104% 105%106%

144%

84%

98%

209%

104%103%

115%

104% 103%108% 105%

111%

64% 61%

35% 38%

60%

105% 108%100% 99%

107%101%

95% 99% 103%98% 99% 99%

104% 106%101% 98%

105%100%

0%

50%

100%

150%

200%

250%

Exec Sr Mgr Mgr Sr Indiv Indiv All Levels

ABC Co. as a Percent of Market

2013 Base Target Variable Target Total Cash Equity (incl. ESPP) Total Cash & Equity Benefits Total Rewards


Market-Leading Actuarial Benefits Valuation

Competitive benefit values can be

analyzed for each component, or as

a whole benefits package:

Health

Retirement

Risk (life, AD&D, disability, etc.)

Paid time-off

Perquisites and allowances

Mandatory/Statutory

Incumbent-level analyses allow for

detailed filtering by key demographic

factors critical to your organization:

Employee Category/Level

Functional Group

Business Unit

Geographic Location

Age

Tenure

Performance Rating

Common Straw-Man Population

You Market

Incumbent-Level

You vs. Market

Analysis


Aon Hewitt’s Extensive Global Benefits Data

Analytics relies on benefit specifications being provided to Aon Hewitt/Radford

Aon Hewitt technology benefit survey intended as the primary source of data:

Aon Hewitt Global Benefits Survey – Technology

Covering the US, 21 countries in EMEA and 13 countries in APAC

The survey covers the full breadth of employee benefit programs

− Health

− Retirement

− Risk (life, AD&D, disability, etc.)

− Paid time-off

− Perquisites and allowances

In 2013, the survey will add an additional country in APAC and nine countries in the Americas.

Aon Hewitt Greater Insight

The Greater Insight platform provides an integrated technology solution to manage benefits globally. The platform allows clients to both access Aon Hewitt’s benefits surveys while streamlining data collection and benchmarking.


Deep-Dive Benefit Details


2013 List of Benefits Survey Participants

UK Aon Hewitt Hi Tech Benefits Survey Participants

Adobe Cisco International Rectifier OpenText

Amazon EMC Kronos Qualcomm

Apple Google LSI Seagate

Autodesk HP Microsoft Twitter

CA Technologies Intel ON Semiconductor

Germany Aon Hewitt Hi Tech Benefits Survey Participants

Adobe Cisco International Rectifier Qualcomm

Amazon EMC LSI Seagate

Apple Google Microsoft Twitter

Autodesk HP ON Semiconductor VMWare

CA Technologies Intel OpenText


Sales Incentives (afternoon session)


Low level of

variable pay

Turnover not

particularly high

Inconsistent

approach to SIPs

compared with

other Divisions

Sales Incentive Plan Case Study

Key issues

Inefficient or badly funded

No motivation for stretch

performance

Poor target setting

One-size-fits-all

approach

Poor pay-to-performance calibration

Weak ownership

and governance

51


The Transition

We are often asked to:

- Assessed current plans and roles

- Measure effectiveness

- Look at external trends and market comparison

- Formulate basic SIP principles

- Create a master database to improve administration

- Apply our global eligibility criteria when assessing plans and roles

- Simplify and streamline plans


The Process

SIP Policy Audit

Roles and

Eligibility

SIPs vs VCP

Number of discrete ales roles

Consistency across the business

Pay mix and

quantum

Pay benchmarking

Pay mix relative to market

Measures and

performance

Payment frequency

Measures and gateways

Degree of stretch/payout curve

Caps

Recovery of payments

Target Setting Process (ideal and current)

Validation of performance to payments

Governance and

ROI

Diagnose problems via process mapping

Local vs. central control

DOA

Reporting

53


Summary of Review

Sales plans: - Have only a small

proportion of pay at risk

(90:10)

- Salary and total cash

levels lag the market

considerably

- The shape of the curve in

the plans accelerates

and caps out early

BU A plan costs are

modest in relative

terms

Eligibility criteria

unclear

A quantitative scale

was applied to assess

SIP eligibility

Category BU A BU B BU C Overall

Number of SIP

Individuals 65 16 29 110

Average Base 30,158 35,194 36,060 32,447

Average Target

Incentive 3,256 29,775 6,457 7,957

Average Actual

Incentive 2,815 19,098 4,360 5,591

Average

Fixed/Target

Ratio

90/10 54/46 85/15 80/20

Revenue 10X BU B =BU A

Revenue

Generated

Per Individual

H L £1,682,759 £970,022

Salary +

incentive as %

Revenue

4.4% 9.1% 2.4% 3.9%

54


Design Changes

Design changes developed with the business

- Tighter eligibility criteria

- Shape of the curve

- “Taking the top off’ and seeking to get more leverage out

of the plan

- More leveraged package; from 90:10 to 80:20

- Tighter administration

- Clear governance guidelines

55


Design Change

0

10000

20000

30000

40000

50000

60000

70000

80000

0% 80% 90% 100% 110% 120% 130% 140% 150% 160% 170% 180% 190%

Pay

-ou

t

Percentage achievement of Target Performance

BU A SIP Payment Curves

Current European Plan Proposed European Plan (80:20) Proposed European Plan (75:25) Current US Plan

56


Design

Approve Administer

Evaluate

SIP Governance

Plans still right for the business

Performance and pay reporting

Dispute resolution

Plans align with business needs

Plans are designed to enable effective administration

Performance and pay reporting

Dispute resolution

The Governance Board for each business can optimally govern SIPs by breaking the process into a four-stage cycle.

The focus of the review has been more business accountability and robust administration processes.


Criteria Business

Govern-

ance Board HR SPA

Objectives

Clear and explicit statement of the plan’s

intended business results is required.

Does the plan comply with the SIP principles?

R D I, R P

Eligibility Point system compliance required. R D I, R P

Measures

Are the measures impacting business results

and in control of the role?

Are the measures simple enough to be effective

and administer?

Should not exceed maximum of 3 measures

Minimum weighting should not be less than

10%

R D I, R P

Design and Approval


0

2

4

6

8

40

%

45

%

50

%

55

%

60

%

65

%

70

%

75

%

80

%

85

%

90

%

95

%

10

0%

10

5%

11

0%

11

5%

12

0%

12

5%

13

0%

13

5%

14

0%

14

5%

15

0%Nu

mb

er

of

em

plo

yee

s

Actual as a % of target

Europe

Metrics Overall Software/Gaming

Internet/ E-Comm

LMN

Base Payroll: Total as % of Revenue 2.1% 6.0% 4.9%

On-Target Incentive/Commission: Total as % of Revenue

2.6% 4.5% 3.7%

Actual Incentive/Commission: Total as % of Revenue

2.3% 3.7% 3.1%

Base + On-Target Incentive/Commission: Total as % of Revenue

6.7% 10.1% 8.9%

Base + Actual Incentive/Commission: Total as % of Revenue

6.6% 9.5% 7.7%

The Governance Boards will meet quarterly

The Sales Plan Administrator will ensure that all documents are submitted to the Governance Board prior to the meeting

A standard approach for minutes and reporting will be adopted

Timetable and Reporting


Metric Metric Current Status

Grade

1. SIPs will drive profitable growth

YOY Revenue Growth %

YOY EBITDA growth %

SIP costs as % revenue/EBITDA

%

2. SIPs will be straightforward and transparent

Number of Plans #

Number of Participants #

Number of plans per role #

3. SIPS will adopt a common approach across Europe as far as possible while reflecting major differences in sales roles where genuine differences exist

Consistency of SIP practices

Ease of administration

Poor

4. SIPs will reinforce the achievement of quantitative financial sales targets

Appropriate financial metrics

In place/not in place

5. SIPs shall include measures that are

within individuals’ control

Measures are driven by sales effort not general trading conditions

Appropriate/no appropriate

6. SIPs should provide for competitive reward at target and enhanced reward for significant over-achievement

Distribution of performance and payouts

Distribution acceptable

SIP Evaluation


Equity Trends (afternoon session)


Market Practice in Germany (disclosed data)

Company Principles Equity Plan Practice

SAP Reflect SAP’s size and global

presence as well as economic

and financial standing

Internationally competitive

Restricted share unit plan with

focus on SAP share price plus

objectives drawn from company

strategy

KPI’s: non-IFRS total revenue,

non-IFRS operating profit

Caps at 150% of initial RSU

allocation at beginning of year,

full loss of incentive is possible

3-year holding period

Qiagen Ensure competitiveness of pay by

conducting benchmarks with

European and US companies of

comparable size and complexity

in a similar industry

Strengthen the commitment to

the company and achieving

strategic initiatives

Mix of Stock Options and

Performance RSU

RSU’s have10-year vesting

period, grants contain operational

and financial goals

Options vest after 3 years,

Individual KPI’s

Source: Publicly disclosed data


Market Practice in Germany (disclosed data)

Company Principles Equity Plan Practice

Deutsche Telekom Market competitive Total

Compensation

Enhance middle- and long-term

financial appreciation

Share Matching Plan, 4 year

holding period, matching rate 1:1

with a volume of 10 to 33% of

STI

Cash LTI plan with the KPI’s:

ROCE, EPS, customer

satisfaction, and employee

satisfaction (25% weighting for

each of the KPI’s, capped at

150%, 4 year assessment period

Dialog Semiconductor Ensure a comp structure that

allows to attract and retain

executives of high calibre

Align compensation with

shareholder interests and

promote creation of sustained

value

Deliver shareholder value

through long-term profitability and

share price growth

Performance share plan with a 3-

year holding period

Linked to performance by using a

combination of EBIT, revenue

and share price growth

De-link salary and grant level by

referencing a percentage of a

pool rather then by reference to

salary

Source: Publicly disclosed data


Types of Long-term incentive programs – Technology Sector in Germany

64

When examining overall eligibility we find that most tech firms do operate equity plans in Germany

Stock options and restricted stock/units or a combination are still the most prevalent in Germany

Types of Equity Programs (% of companies using

vehicle) All companies

Public

Companies Private

Companies

Companies with equity/LTI plan covering local nationals in Germany

Yes 79.8% 89.0% 48.7%

No 20.2% 11.0% 51.3%

Types of plans (% companies = of those with any plan):

Stock Options 60.1% 58.3% 71.1%

Restricted Stock/Units (RS/RSU) 76.2% 84.3% 26.3%

Restricted stock only 6.6% 6.8% 5.3%

Restricted stock units only 63.7% 71.1% 18.4%

Both restricted stock and units 5.9% 6.4% 2.6%

Stock Appreciation Rights (SAR) 2.2% 2.6% 0.0%

Long Term Cash Bonus Plan 2.2% 5.1% 13.2%

Employee Stock Purchase Plan (ESPP) 40.3% 46.8% 0.0%

Other 0.0% 0.0% 0.0%

Source: Radford Global Technology Survey Germany - July 2013


Overall Equity Eligibility and Receipt Rates – Technology Sector in Germany

65

94%

85%

51%

41%

47%

39%

30%

9%

70%

61%

29%

12%

28%

12%

6% 4%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

VP and above Director Manager Supervisor / TeamLead

Expert/Principal Career/Advanced Entry/Developing Support

Eligibilty in % Receipt rate in %

When examining overall equity eligibility and receipt rates, employees at technology companies did not receive equity as it was planned

However, equity receipt rates in German technology companies remain high throughout all employee levels, with the most equity awarded senior management and directors



Eligibility for Types of Equity Vehicles – Technology Sector in Germany

66

41%

46%

30%

21%

28%

15%

10%

3%

74%

60%

39%

30%

17%

32%

27%

8%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

VP and above Director Manager Supervisor / TeamLead

Expert/Principal Career/Advanced Entry/Developing Support

Stock Options Restricted Stock and Performance Shares

When examining trends of vehicles used at technology companies in Germany there is clear trend that Restricted Stocks and Performance Shares are used more extensively than Stock Options



Equity Trends in Europe

Increasing regulation of executive pay

Topic Observations

Switzerland

Minder Initiative

Minder Initiative: Swiss referendum approved in 2013

Binding vote on the aggregate compensation of the Executive Board and

Board of Directors

Annual re-election of the Board of Directors and the Remuneration

Committee

Prohibition of new hire, severance and transaction bonuses

UK

Enterprise Regulatory

Reform Bill

A binding vote on executive pay policy and new hire/exit payments

Annual advisory vote on how pay policy is implemented

A single figure pay disclosure

Germany

Corporate Gov. Codex

VorstKoG – Say on Pay

Recommendation to limit individual salaries of board members in its

overall volume and also the variable components. Supervisory board shall

take into account the relation in salaries between board and other

managers

From 2014 on the salaries of the board need to be voted at general

shareholder meeting. Results of vote are binding for supervisory board

European Commission is drafting new legislation expected by the end of 2013, which, if passed,

will introduce shareholder vote across all 27 EU countries



What we talk with our clients about

Topic Observations

Vehicles and performance

measures

Move away from options to shares continues

Moving away from relative TSR or reducing the weight of relative TSR due to:

Difficulty in establishing and maintaining appropriate peer groups

TSR performance over 3-year period is influenced more by changes in

market assessment of fundamental value rather than changes in

fundamental value itself

High TSR volatility in the current market

Perceived lack of line-of-sight and low motivational value

New LTI plans reflect more company’s strategic longer-term ambitions than competitive

market practice by incorporating company-specific measures

Over- and underachievement shall be treated appropriately

Executive Share

Ownership

Increasing adoption of formal share ownership guidelines for senior

executives across Europe

Review of share ownership policies to increase actual executive share

ownership (Siemens, BMW, DT)

Implementation of share matching plans (BMW, DT)



Outlook for 2014

Observations

Increasing regulation

More pressure on Remuneration Committees

More investor engagement/scrutiny

Greater emphasis on longer-term shareholding

Continued challenge to link pay better to performance

Push to further improve remuneration disclosure and transparency

Fewer companies across the sectors use options as the only vehicle


Round Table Discussion


Pre Meeting Questionnaire Results

Salary Increase Budgets

Which data do you use to determine your salary budgets? (inflation, forecasts, business results)

How many data sources do you combine?

How do you handle mandatory increases in some countries?

How do you treat key countries in Southern Europe?

Are execs and non-execs managed in a similar way in terms of e.g. rules and processes?

Salary Increase Budget

A valid annual merit review on executive level

Average of increase in the industry

Limited pay budget - how to allocate fairly

Salary Increase Budget Planning 2014



Benefits/Retention

How do you manage Benefits? Globally, regional, locally?

Do you have a central overview of your benefits given per country?

Who manages C&B together, who separately?

Who uses flex benefits/cafeteria models? Share your experiences.

Fringe Benefits/establish car policies in a number of EMEA countries

Pensions/Benefits Inventory/flexible benefits plan

How do you identify and manage your key positions? (Globally, with IT support, who is involved?)

How successful are you in finding, keeping and developing your talent?

Do you strongly use compensation and benefits for recruitment and retention? What else? How flexible are you on salary requests form key position holders?

Compensation for key positions

non-salary related retention packages

Additional payments



Structure

Which structures are you currently using to manage your C&B?

One global structure, different regional structure, country specific?

How much IT-Support do you use to manage a globally consistent structure?

Do you have a global salary admin platform?

Do you have different responsibilities in managing your Exec and Non-Exec structure?

If so, how do you ensure a good interaction

Is span of control an issue for you?

Global Grading/Salary Structure

Executive Grading

Integration of Executive and Non-Executive Compensation structures/grades/policies Total Direct Compensation Analysis vs. Market



STI/Sales Comp/PM

Open discussion on slides (show Pay Mix in Germany and within sales, non-sales or within sectors)

Sales Compensation Standardization and Simplification

Pay Mix

Sales/STI Incentives (Market Practice)

New sales comp schemes

How strong is your link for pay for performance? How do you ensure that performance results and their influence on pay is handled consistently around the globe?

Do you think that pay for performance is better managed for sales/non-sales?

Which pay elements are influenced by performance? (Base, STI/LTI)

Pay for performance

Performance reviews linked with compensations



Benchmarking

How is benchmarking organized? (locally, regionally or globally?)

What are the differences in Exec- and Non-Exec-Benchmarking? (process and responsibilities)

How do you ensure consistent global benchmarking?

How often do you benchmark? (mature markets vs. emerging markets)

How do you benchmark jobs around skills in cloud computing, special programming languages?

Benchmarking positions

Individual Benchmarks for global executives

Combined Compensation and Organisation Benchmark activities

Lack of information on Cyber Security, benchmark packages salaries

High quality market data for blue colour positions in DACH


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