3 takeaways from the LeadingAge-CEMO Executive Compensation Study
The 2015 LeadingAge–Chief Executives of Multisite Organizations Executive Compensation Study indicates that succession planning should be a high priority for many nonprofit senior living organizations, Mario Mckenzie, a partner in CliftonLarsonAllen's Charlotte, NC, office, tells McKnight's Senior Living in an exclusive interview. Results of the survey, conducted by CLA, also provide insights into incentive pay and gender differences in pay and title, he adds.
1) Succession planning
Many senior living CEOs are older than 65, Mckenzie says, and “if you look at the average age of the CEO compared with the CFO and COO, there's not a huge spread.” Because organizations traditionally look to the positions of chief financial officer and chief operations officer to find CEO replacements, he adds, their boards need to broaden their searches and also create opportunities for others within the organization to learn new skills and advance. Otherwise, Mckenzie says, “It's going to be pretty challenging to go through a succession only to turn around and do it again in a couple of years.”
To aid in succession planning, he says, organizations can ask executives who are targeted for promotion to identify and train their replacements before being promoted. And board members, Mckenzie adds, should examine their organizations' succession plans and ask several questions: “Is the plan well thought out? Is it foolproof? What if my CEO does leave? Am I prepared to go through a search? How are we going to do the search? Is it going to be external? Internal? Is it going to be a crisis?” Advance planning will help ensure that the answer to the latter question is no, he adds.
Some organizations, Mckenzie says, may seek an affiliation or merger with another operator that has a CEO who is not near retirement. “If you're a board, you should be thinking about all of these types of transitions,” he adds.
2) Gender differences
LeadingAge–CEMO survey results show that CEO and CFO positions in senior living organizations tend to be held by men, “but for the rest of the organization, it's a pretty even split between male and female,” Mckenzie says. So if organizations look internally for CEO replacements and look beyond just the CFO's office, he adds, the field should start to see more women CEOs.
Most women already in CEO roles in senior living lead smaller organizations, according to survey results. Because CEO compensation “is pretty linear” with an organization's size, average pay for CEOs who are women is lower than the average pay for CEOs who are men, Mckenzie says.
When income is plotted relative to organization size, however, the survey results show that women are being paid more than men more for their work, Mckenzie says. So as more women are hired at larger organizations, overall pay may become more similar.
3) Incentive compensation
The 2015 LeadingAge–CEMO survey also found that incentive compensation aligns well with nonprofit organizations' missions, Mckenzie says.
“It's pretty clear, at least in the nonprofits, that when you look at incentive compensation, there are a lot of factors that go well above and beyond just profitability,” he says. “In fact, probably the bulk of incentive compensation is tied to other types of factors that don't necessarily link to profitability—growth, strategy, quality.” At for-profit senior living organizations, by contrast, the correlation between incentive pay and profitability most likely would be much higher, Mckenzie says.
The report, he says, can serve as a roadmap for nonprofit senior living organizations, showing them how to document and create incentive plans that satisfy IRS regulations.Lois A. Bowers is senior editor of McKnight's Senior Living. Follow her on Twitter at @Lois_Bowers.