While Construction Executives' Salaries Rise, Companies Alter Compensation Programs

Sep 1, 2004 12:00 PM

In the wake of economic instability, executives at the nation's top construction firms have found their salaries increasing a median 4.3%

In the wake of economic instability, executives at the nation's top construction firms have found their salaries increasing a median 4.3% for the first time in several years. Specialty Consultants, a Pittsburgh-based talent resource management organization, recently released its 2004 Construction and Real Estate Executive Compensation Report, which surveyed senior and human resources executives from the top 50% of the nation's contracting firms. The survey found that nearly 60% of those polled said that they expect to earn more in 2004 than they did in 2003. But while they're enjoying the increase, many companies are changing their executive compensation practices from long-term to short-term incentives. The report references a study that states 75% of all U.S. companies are using some form of variable compensation to provide short-term incentives. Many companies are enforcing a pay-for-performance paradigm, which is based on the recognition of the achievement of specific performance expectations set for an organization, group, department, or individual. One program attracting a lot of attention is the performance unit plan (PUP), which links financial rewards to graduated, longer-term individual achievements. PUPs are paid out in cash at the end of a term, and they don't entail prolonged financial obligations the way many long-term incentives, such as stock or profit-sharing plans, do. According to the report, companies are finding that a PUP's pro-rated reward structure keeps executives who don't make their goals from getting burned out, and provides an incentive to remain with their employer until the plan matures. (See Table)