As we continue to get our hands around COVID-19 as it relates to hiring, I want to discuss the compensation model and compensation in general. COVID-19 has caused a rise of angst throughout our entire community; however, it really has not caused a major disruption when it comes to compensation. The offers that I have been fortunate enough to receive on my candidates’ behalf are probably the same offers I would have received if COVID-19 did not exist. The bigger concern is not the initial offer; it is how their bonus will be affected knowing that the amount of issuance may be disrupted due to lack of personal visits to the issuer.
Base Compensation Model
How are firms dealing with this dilemma? Before we answer that question, let us examine the base compensation model. Most of my current firms are still going with a base salary alongside either a discretionary or formula-based bonus compensation. For candidates that are making a move, we have been able to help them relieve some concern of the unknown by negotiating guaranteed bonuses up to two years. This is only occurring for managing directors and/or the equivalent revenue producers that are a proven commodity. Firms are willing to guarantee bonuses to help alleviate the concern for these special candidates (in demand candidates they choose to move during this COVID-19 environment). For bankers, whose revenue stream has fluctuated over the years, this is much more difficult to accomplish.
Guaranteed Or Non-Guaranteed Bonuses
For those candidates that are not comfortable representing a certain amount of revenue they could bring over within the first 12 to 18 months, firms are offering competitive salaries. However, bonuses will strictly be based on production less selling expenses, if any. Firms are more than willing to give people the opportunity to prove themselves by guaranteeing the salary but making the bonus non-guaranteed. This new compensation model is being accepted by those candidates that truly want to make a move and are less than the managing director level. The thought of having someone mentoring and helping them transition their business is equally as important as a guaranteed bonus. Firms are also aware that ramp up periods are taking longer, and firms are now offering accelerated/increased payout levels during that first 12 months. This is to help qualified candidates bridge that gap.
The New Compensation Model We’re Seeing
This above model is being applied to what I call the regionals, the super-regional firms, and the smaller financial advisory firms. Analysts and junior bankers are strictly being paid a salary with a discretionary bonus. The bonus is based on the profit and loss of the department and/or office they’re assigned to. Bond counsel firms are going with the higher salaries based on a predictive model looking at past hours billed. However, it is staying away from the guaranteed dollar amount for a bonus. They are implementing a new model, which is based on hourly billing and additional revenue sharing models to determine the competitive bonus formula. The new model entices bond councils to move from one firm to another. For 103 lawyers, this model is extremely difficult to implement as most tax councils generate revenue from other attorneys in the firm. For the 103 lawyers, it is coming down to guaranteed salary and a bonus structure based on how well they are billing. Regretfully, this is completely out of the control of the typical traditional103 lawyers. To further discuss a compensation model as it applies to yourself, reach out to me for a confidential conversation.
About Harlan Friedman, JD & Founding Member, H. Friedman Search LLC. Harlan is a thirty-year veteran Public Finance Banker turned recruiter who specializes in the placement of all level Public Finance Bankers, Health Care Bankers, Municipal Financial Advisors, Compliance Officers, Issuers, and Bond Counsels.