Canadian HR Reporter - Sample Issue

CANADIAN HR REPORTER May 1, 2017 8 NEWS Bombardier is in the midst of a five-year turnaround plan that is projected to eliminate 14,500 company jobs around the world by the end of 2018. e news of increased compen- sation sparked protests in front of Bombardier's headquarters in Montreal, as well as at Premier Philippe Couillard's office. Prime Minister Justin Trudeau also faced criticism in the House of Commons. On April 10, Bombardier's board of directors approved changes to the compensation packages for its top executives, delaying more than half of last year's scheduled bonuses until 2020 — provided the company meets its objectives. Executive chairman Pierre Be- audoin's total compensation was cut by US$1.4 million to match the $3.85 million he collected in 2015. CEO Bellemare received US$9.5 million in 2015. Work in progress e move to defer compensation awards until 2020 is less a "full commitment to rescind pay" and more an "admission to a public relations gaffe than any sense of wrongdoing," said Gandz. "The challenge is not easy," he said. "ey have to pay key people competitively to hope to turn around the company, but they have to be very discerning as to who those key people are, and ensure that others, especially controlling shareholders, are not just coat-tailing on their compen- sation formula." Such a situation calls for "clear- minded, highly independent di- rectors," said Gandz. More progressive boards will reach out to their shareholders and stakeholders to seek input on general direction regarding com- pensation, said Ken Hugessen, a compensation consultant in To- ronto. By discussing direction in advance, the board would be able to modify some of its initial direc- tions to reflect the input, result- ing in a reduced risk of surprise to shareholders when the proxy is released. "It comes as a surprise, and a little bit of a disappointment, that when the two governments involved put money in, there was no mechanism for the monitor- ing, oversight and control (put in place)," he said. A detailed letter of explana- tion posted on the company's website by Jean Monty, chair of Bombardier's human resources and compensation committee, offered some reasoning behind the board's decision, but was too little too late, according to Hugessen. "e problem is once you've shocked someone, they don't hear that stuff," he said. "A little more anticipation may have greatly reduced what ultimately happened." "We have a much broader is- sue that we have a free-market environment. ese people were all hired within the last two years. You don't really have a lot of choice. Most people there don't really wear the problems the com- pany's had. ey just weren't there and were kind of brought in to try and fix it," said Hugessen. "But I think it's fair to say the fix is a work in progress, so may- be we'll save the prize money for a little later, which is the deferral." Justifying the compensation As the largest industrial com- pany in Canada, Bombardier requires a world-class leadership team in order to compete in the market, said Monty in his public statement. "We benchmark our execu- tive pay structure against other public companies of a similar size and scope — the companies that we compete with for the best talent." e company also aligns pay with performance, with 75 per cent of compensation not guar- anteed. Instead, it is linked to 22 per cent and 53 per cent in short- and long-term goals, respectively, said Monty. While such a structure isn't out of the ordinary, Bombardier may have erred in continuing to rely on traditional compensation pack- ages, rather than back-loading its executive contracts with larger, long-term, performance-based bonuses, said Bob Levasseur, managing director of Gallagher McDowall Associates, an HR con- sultant firm in Toronto. Typical formulas see compa- nies examining the market for comparable organizations' pay structure, and then aligning their annual compensation packages of base, bonus and incentives ac- cordingly, he said. "I'm very much for ensuring you have pay at risk, and real risk," said Levasseur. "Using the typical in this case was a problem because the organizations that do have those kinds of programs are those who are doing well." "It really is a difficult situation… e public has a real problem with all of this because (Bombardier) has been garnering significant amounts of subsidies. When you are accumulating government subsidies, you're no longer ac- countable only to your sharehold- ers and the people who are lend- ing you money, but you're also accountable to the public. "I think there wasn't enough reaction to the sensitivity that the public would have." Attracting top talent e public will always struggle with corporations awarding mas- sive amounts of compensation to executives, while simultaneously laying off lower-level employees. But such outrage should instead be directed towards the roots of capitalism itself, said Gandz. But it will be hard to convince laypeople of that, said Levasseur. "Everybody feels that (execu- tives) are always making too much money. But under normal cir- cumstances, you're accountable only to the shareholders and the debtholders." Poor timing and communica- tion between the company and shareholders didn't help Bombar- dier's situation, said Levasseur. "ey're between a rock and a hard place and from a public relations perspective, they didn't handle it well at all," he said. "ey're caught with a dilemma of hiring some high-priced help who have huge challenges and they want to reward them. (But) they could have positioned things differently." It's always difficult in hard times because that's usually when em- ployers need the most talent, said Gandz. "e periods where organiza- tions are doing the best are usu- ally when they're the easiest to manage. You don't have hard decisions to make, often times the stock market is just humming along, and the economy's strong… It's when you've had some difficul- ties and you have to make chang- es that you need to bring in the heavy-duty talent." It is common for companies to structure contracts with individ- ual elements of base salary, plus short- and long-term incentives. For struggling companies, this is even more important if they have any hope of attracting top talent, said Hugessen. "Any reasonable person is go- ing to say, 'I want a contract and I want some reasonable assurances here,'" he said. "You've got one time in the sun and you better make the best of it. You don't want to be spending it with someone who ends up not paying you." But the furor surrounding the company's pay structure isn't like- ly to spur fundamental change to executive compensation formu- las, according to Levasseur. "Other companies are likely to think their own plans and com- pensation magnitudes are appro- priate," he said. "ey view Bom- bardier as an exception because of the government subsidies." Poor timing, communication BOMBARDIER < pg. 1 employers don't know what to look for, and how it equates. is is even compounded further for the people from overseas looking for work." Employers are also hesitant about taking a competency approach. "ey have to take a long-term vision," said McKay. "Employers need to find that visionary within their organization who will sup- port this, and then they have to get management support to give them time to work on this, and they don't necessarily see the fruits of their labour right away — it can take years." The federal government and some provinces have invested money in defining competency frameworks or occupational stan- dards, and tools to go along with them, but it tends to be fragment- ed by industry or sector, and when financial support is withdrawn, a lot of these sector councils cease to exist, she said. But a number of colleges and universities are mapping their cur- riculum to competencies, she said. "ey're very keen to do this be- cause they need to make sure that education is relevant to industry." Getting started When it comes to figuring out the framework, the hardest part is as- sessment and equivalency, said Lane. "First of all, we have to break the job down by tasks and subtasks; then we have to figure out what level of competence is needed to do that. at is time-consuming and it will take resources to do, but then (it's about) how do you assess, what are those criteria for objective assessment of that competence, and seeing what the equivalence is," she said. "But the cool thing is we don't have to start from scratch, the rest of the world is a lot further ahead than we are. ere are different standards of practice around the world, and doing something in Korea is basically the same thing as doing something in France, is basically the same thing as doing it in Canada." e hardest part is getting a standard, and establishing the common terminology and defini- tions and approach — but there are lots of examples from around the world, said Griffiths. "We have this notion somehow that we're different, not just at a national but a regional (level), but the reality is the work people do in particular fields and particular industries tends to be the same around the world because it's global, not regional," he said. "If you look at where the frame- work approach has been success- ful, these are countries where you've got a well-developed edu- cation system… you've got gover- nance… you've got mechanisms for co-operation between levels of government, between indus- try and government, and there's a rule of law," said Griffiths. "And Canada is a country that falls into that category… because we have so much of those infrastructure pieces in place now." ere's also the challenge of the different regions in Canada. e provinces and territories have ju- risdiction over education, train- ing and workforce development. And while each region could develop its own frameworks in- dependently, with a Canadian framework serving as a transla- tor (as is done with the European framework), Canada West would prefer another approach because of the complexity and expense of developing and co-ordinating 13 frameworks. "We don't have to do the whole country, every job, every occupa- tion right now; we can start in one sector and get agreement across the country in that one sector," said Lane. "Once we've set the protocol for how this framework is created, then we'll be able to add to it over time as other industries and sectors and employers and training providers come in on the deal." Canada West thinks it would make sense to start something in manufacturing because it's fairly technical, it's becoming more customized and there's more au- tomation, said Lane. "It makes it a little easier if it's not so much conceptual as it is technical, the kinds of competen- cies that you need in that environ- ment. And yet a lot of what's going on in manufacturing is not already covered by a regulated trade, for instance, so that makes it a little bit easier to squeak in there as a place to really show that this works." In manufacturing, the jobs are going to be significantly af- fected by automation and robot- ics, requiring greater skills, said Griffiths. "And it's a sector that encom- passes so many parts of the Ca- nadian economy, and has a lot of contribution to the GDP, so we see it as being an area where this could potentially have a signifi- cant impact," he said. "And, ideally, (we should) do it in a place where they don't have right-to-practice legislation and regulatory bodies, all of which have to be accommodated within that system. That has the po- tential for turning into a bit of a quagmire." 'We can start in one sector' FRAMEWORK < pg. 7 Credit: Christinne Muschii (Reuters) Alain Bellemare, CEO of Bombardier, in Mirabel, Que., in November.

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