Key Person

Total Rewards

For Small & Mid-Sized Businesses

HR FoundationsBuild, Engage & Reward

Panelists

Robert DiGioreLawley Benefits

Diana SouthallHR Foundations, Total Rewards

Tom ZuggerMass Mutual

Agenda

Problems with Rewards in Smaller Organizations

3 Solutions for Linking Rewards with Results

Elements of a Total Compensation Portfolio

Short Term vs Long Term Rewards

Case Study- Long Term Incentives

Typical Reward Design Process

Questions & Next Steps

5 Top Problems

with

Key Person Rewards

Value of a key personHow do you fairly value a person’s role

and contribution in the company?

Problems- Bonus is

Incentive Plan BrokenSeen as entitlement, No “line of sight,” or

Formula doesn’t match individual contribution or results

Variable Profits You don’t want a plan with a

guaranteed incentive payout, that

costs more than you can afford

Problem: Retain

OwnershipYou may want to reward and

retain key people, without giving

up stock

Problem: 401K Maxed

Maxed outKey people contribute to 401K plan

limits, so extra compensation is paid

out with a large tax bill

The Solution- Reward Key People

To share pay and profits based on their role and their results

For building long-term business value (not just this year’s profits)

To think like an owner (without giving away shares)

To stay with the company and put their heads and hearts into building it with you

4 Compensation Goals

Reflect Internal Role

01

Market Competitive

02

Aligned to Business Goals

03

Drive Ownership Thinking

04

4 Elements of Total

Compensation

BenefitsMembership & Loyalty

Change in

PayPay for Performance

IncentivesResults Gain-sharing

Base PayRole &

Responsibility

Short Term &

Long Term

Promise: Pay for PerformanceWhen managers do the Right Things that produce profits and grow the long-term business value, plan shares the gain

Promise- Team

Key people feel they're rewarded to

work with you together to achieve the

business goals

Promise- Ownership thinking

People engage their heads and hearts,

and make decisions that build the

business

Short Term vs Long Term

Short Term

• Pay for Annual Results

Long term

• Pay for Building Value

Benefit: Long Term Incentive Plans

Varies

• Annual funding based on profit levels

• Adjusted based on individual results

Retain

• Focuses on long term value creation

• “Golden handcuffs” – vested payout

Taxes

• Tax deferred instead of W2 payout

• Additional retirement vehicle

Owner

• Defer compensation for stock transfer

• Provide fund for owners retirement

Case

Study problem

solution

result

CASE STUDY: Mr. Client, Age 45, Ultra Preferred, Non Tobacco, Whole

Life Legacy 10 Pay, Face Amount $230,717

Year AgeAnnual

Premium

Annual

Retirement

Income

Cash Value Death Benefit

1 46 10,000 3,531 230,787

5 50 10,000 40,853 237,304

10 55 10,000 104,134 253,936

15 60 141,174 296,784

20 65 23,061 165,928 304,226

21 66 23,061 151,656 270,908

22 67 23,061 136,301 238,103

23 68 23,061 120,279 218,690

24 69 23,061 103,456 198,444

25 70 23,061 85,784 177,297

26 71 23,061 67,220 155,239

27 72 23,061 47,717 132,229

28 73 23,061 27,225 108,284

29 74 23,061 5,719 85,060

35 80 16,675 89,443

40 85 26,491 91,744

45 90 34,020 91,221

50 95 34,316 81,297

55 100 42,831 42,831

MassMutual Life Insurance

CompanyThomas R. Zugger, CLU, ChFC, CLTC

Robert DiGiore

*Dividends are neither estimates nor guaranteed, but are based

on our 2016 dividend scale. Dividends in the future may be lower

or higher, depending on the company's actual experience.

Reward Design Process

Total Reward

Compensation

Plan

Business

PlanIdentify

what

creates

business

value

Dash-

boardsTrack

Review

Improve

Business

Metrics

RolesClarify roles

responsibility,

accountability

expected

performance

TargetsEstablish

and value

reward

targets

(base pay,

incentives)

DesignReward

results,

reduce tax,

retain value,

plan for

transition

ModelForecast

payouts and

future

values to

ensure

meets goals

InvestmentsSelect investment

vehicle and plan

design

Complimentary

Total Rewards Evaluation

Schedule ConsultationDiana & Robert

EvaluationIdentify your needs

Outline Game PlanProject timeline and investment

Design PhaseCustom Rewards Plan

01

02

03

04

Total Reward EvaluationEvaluate your current key people, plans, business and owner long term goals

Game Plan ProposalSpecific detailed outline of timeline and investment to create & implement your Total Rewards Plan