HR specialisms : external remuneration consultant

The image of the external remuneration consultant is often one of someone
brought in to top up the cream of ‘fat cat’ pay. The New Statesman last month,
for instance, berated remuneration consultants as being "the engineers who
keep the gravy train on the rails".

The reality, as ever, is somewhat different. External remuneration
consultants do have a role in gauging market conditions and then setting top
salaries, share options, bonuses, pensions and general remuneration. And this
will normally mean more not less, concedes Peter Jauhal, executive compensation
consultant at Inbucon Meis.

"One executive I am working with wants a senior package less than I am
recommending because he is concerned about pay levels within his organisation.
But that is very unusual," he says.

Yet, adds Duncan Brown, assistant director general at the CIPD and
previously a partner at HR consultancy Towers Perrin, remuneration consultants
also have a central role to play in helping to set packages across an
organisation, not just at the top.

Issues such as performance-related pay, flexible pay structures, cash bonus
schemes and giving packages a more positive image will all fall under the remit
of most external remuneration consultants, he suggests.

"The vast majority of the business is focused on general reward
consulting rather than executive pay," he argues . "For instance, if
you are putting 20 per cent of your money into your company pension but you
have an average staff age of 22 and no one understands it anyway, is that the
best way of delivering that money? It is less about the amount of money as how
you spend it."

At senior executive level, remuneration consultants will generally work
closely with the top executives and the remuneration committee, explains
Jauhal. They will also more than likely have close dealings with key
shareholders, often institutional investors.

Indeed, the remuneration consultants can find themselves caught between the
conflicting demands of the shareholders, who may be looking for money to be
returned to them, and the executives, who want their performance justly

While remuneration consultants have been around at the top end for many
years, it is only in the past five-to-10 years that the need for them has
really caught on. "These days it is much less about salary, and more about
incentives; what are the correct linkages between pay and performance,"
says Jauhal.

Consultants will often come from a professional background and may have been
an accountant, lawyer or actuary, he says. They will have good technical
knowledge of benefits but also have good people skills, be persuasive and
authoritative. There is as yet no professional association for remuneration
consultants, or a specific qualification.

Others come into the function from a general HR background or from general
consultancy work, argues Brown. More and more are bringing MBAs with them.

Some basic skills are needed, including maths, legal and accounting
knowledge. Being able to communicate effectively, speak well in public and
handle tough questioning from the remuneration committee all help.

"When it started off, remuneration consulting was all about formulas.
Now it is very much about what the organisation is trying to achieve, what are
its goals; so it is more process focused," he says.

Listening skills are an asset, adds Jauhal. "If you are too outgoing
and always talking, you may not listen enough. But it is an exciting job
because you are in the heart of the organisation. I have never found it

Junior external remuneration consultants can expect to earn in the region of
£50,000 to £60,000, rising to £200,000 to £300,000 for a senior consultant,
estimates Jauhal.

At the moment there is a distinct shortage of good reward consultants,
either external or in-house, says Brown. Headhunting has become commonplace and
some consultancies are even targeting graduates in the hope of grooming and
training them.

Pluses of the job include dealing with the top people in an organisation and
being a key cog in the machine. But this can also work against you as, if you
get it wrong, your decisions can have a huge negative impact. There will also
often be hefty travel commitments.

There is a great deal of variety to the work, and a remuneration consultant
generally has a chance to be more relationship-based than a general HR
consultant, argues Brown.

Consultants will often build up and maintain relationships with clients over
many years. "If you see something that you have done that goes into an
organisation and makes a difference that is great.

"I once started a bonus scheme for a utility that resulted in a huge
turnaround in financial performance. That gives you a massive buzz," says

Case study: Carol Arrowsmith, head of executive compensation, Andersen

Boardroom pay is an area many executives, fearful of incurring the wrath of
the media, are reluctant to talk about openly. But, says Carol Arrowsmith,
partner and head of Andersen’s executive compensation practice, consultants and
executives should be more confident about stating their case.

"Most people can see what David Beckham does, but they have more
difficulty understanding what, say, Luc Vandevelde at Marks & Spencer does
for his money until you see the turnaround of the business," she says.
"But everyone has a stake in British businesses succeeding, it’s our
prosperity and our pensions."

Arrowsmith started her professional career in personnel with BP in 1977,
moving into consultancy work in 1981 and then to Andersen four years ago. She
specialises in boardroom pay, and currently leads a team of some 30

"By definition, being a consultant, you are in there right at the point
of change. If you are somebody with a low boredom threshold, being a consultant
is ideal," she says.

"It is also an enormous privilege to be paid to work with some of the
brightest, leading talents in British industry."

Arrowsmith cites the example of one client where she drew up a completely
new incentive programme. The organisation brought in a new technology platform
and the programme was cascaded through the business. "The client went on
to dominate its marketplace," she claims.

Over the years, corporate governance and investor relations have become a
significantly more important part of her remit, a trend that is likely to
continue, she forecasts.

The biggest frustration – and it does not happen often – is when an
organisation does not listen to your advice. "It is magic when it works
and dreadful when it does not," she says.

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