Strategic Governance - Human Resource Management Breakthrough

“Mark W. Sickles has done more to advance the applied science of human
resources than anyone else I have worked or studied with.” AT&T HR Leader

Mark W. Sickles, LLC is the creator and sole provider of High Performance
Workplace II products and services. In these tough economic times, you
can’t afford to invest in anything less.

To Corporate Directors:
How does your HR function enable you to meet the board standard of strategic asset and sustainable competitive advantage? As a member of the board, you are accountable to the shareholders for directing and controlling executive officers to deliver superior returns through sustainable means. Did you know this is the purpose of the human resource function?

Board accountabilities include strategy, organizational design, culture, performance management, evaluation, executive compensation, selection & recruitment, and succession planning. When these accountabilities are carried out using an internally aligned strategic human resource management system seamlessly integrated with the business planning process, the standard of strategic asset and competitive advantage is met, and significant increases in sales, profits, and market value are achieved. Enabling you to meet this standard for today’s corporate director while delivering this superior value to your shareholders is the purpose of our unique combination of governance, strategy, and human resource management.

To Executive Officers:
How does your HR function drive long-term shareholder value? As a member of the C-suite, your primary objective is to deliver superior returns through sustainable means. Did you know this is the purpose of the HR function? We have broken through to a new level of HR effectiveness with a unique combination of governance, strategy, and human reosurce management. This new HR standard enables you to integrate the work of the board, management and overall workforce to create the ultimate organization, where ordinary people achieve extraordinary results on behalf of all the firm’s stakeholders.

In this new HR paradigm, the focus is on the overall organization, rather than just the people in it. This broader focus includes strategy, culture, structure, and management systems. When carefully aligned, these organizational factors create a proprietary context in which to build a highly organized, highly skilled, and highly motivated workforce. The combined effect is a powerful source of sustainable competitive advantage and long-term shareholder value. This unique capability, available only from Mark W. Sickles, LLC, will enable you to succeed in the eyes of your board, causing your board to succeed in the eyes of the shareholders.

To Line Executives:
Driving high performance in your organization is your role as an executive. This begs the question: How do you build a high performance workplace? The answer is a masterful application of our breakthrough strategic human resource management system. This system will enable you to seamlessly integrate strategy, organizational design, and operations into a strategic asset and sustainable competitive advantage.

In addition, you will have the systematic capability to build and manage a highly organized, highly skilled, and highly motivated workforce able to manage your systems, in your structure, while practicing your values, all to achieve the goals of the business. In doing so, you yourself will become a strategic asset and source of competitive advantage to your organization.

To HR Executives:
What makes us unique in the Human Capital Management marketplace is our philosophy that the HR function is a powerful strategic asset and source of sustainable competitive advantage that can be exploited by directors, officers, and the overall workforce to build organizations that are great places to work, buy, and invest. When employees can see a connection between their daily work and the “significant few” business goals of the firm, they see the importance and dignity of their work, which adds to the importance and dignity of their overall being, both inside and beyond the workplace. This sense of dignity and significance in self inspires and motivates these people to freely give extraordinary efforts indicative of a high performance workplace, one of the most fundamental goals of a world-class HR function.

To Customers:
As our customer, you recognize the value in aligning your strategy, organization, and operations to create a high performance environment that is a great place to work, buy and invest for your employees, customers, and shareholders. You understand the importance of partnering with an organization that will maximize the performance of your people and company in ways that are unique and proprietary to your firm, providing you with a serous sustainable advantage that drives long-term shareholder value. At Mark W. Sickles, LLC, we have significantly enhanced our ability to deliver this value, making a long-term relationship with us a competitive advantage and sound strategic investment for your firm.

To Investors:
There is a pressing, unmet need in the capital markets for a principle-based, scientific approach to strategic HR management and organizational effectiveness that will enable directors and officers to consistently meet and exceed the expectations of the firm’s stakeholders. Meeting this need is far from easy, requiring an imaginative effort. We have made this imaginative effort, resulting in a powerful point of differentiation that will significantly enhance the performance of our clients’ organizations, while providing a superior and sustainable return to their valued shareholders.

Sample Testimonials:
*Mark has done more to advance the applied science of Humans Resources than anyone else I have worked or studied with.
*Thank you for the gift of Mark Sickles. He is like a wizard – just what HR needs at AT&T.
*Mark made me re-examine my entire HR executive role. This was extremely beneficial.
*The topics Mark covered have provided me with the advantages to succeed in the future.
*Mark is the subject matter expert – someone who can take HR down the right path.
*Mark has helped me see the light. I now see that I have a tremendous amount of work to do, but at least I am on the right path.
*All segments of Mark’s HR system are essential parts of an integrated whole.
*Mark and his SVA methodology are definitely going to help me become more of a strategic partner in my organization.
*Mark ties the material together with real life examples. BEST SEMINAR I have ever attended. And I don’t use superlatives.
*Mark is outstanding. I wish I had 1/10 of his brain power regarding Business Strategy. I know I would be a winner in my new HR role (at HP).
*Excellent information! What a refreshing and pleasant surprise.

Outcome of an Effective MWS Strategic HR Application
From the CEO of American Standard:
“We now have plans to integrate our organizational design with our business strategy.
Specifically, we will act to align our organizational structures with our business goals and shared values. We will act to create a great place to work for a great workforce. We will act to develop our staff, ensuring they have the skills and styles to manage our business systems to deliver superior value to our customers that, in turn, delivers superior value to our shareholders. In doing so, our workforce will become a source of competitive advantage that transforms our company into a great place to buy and invest.”
Note: This MWS application resulted in a HR Executive cover story entitled, “Setting The Standard.”

How Mark W. Sickles Advanced “The Applied Science of Human Resources”:
*By shifting the primary focus of strategic HRM from the workforce as the most fundamental asset, to the organization as the most fundamental asset
*By expanding the scope of strategic HRM from strategy execution, to the overall strategic management process
*By aligning, linking, and integrating the work of the board, senior management, and the workforce
*By creating the organizational equivalent of the human central nervous system
*By creating the formula for smart, athletic organizations that deliver sustainable, superior value to employees, customers, and shareholders
*Mark calls this advancement, “The New HR”, and the enabling software category, “HPW II.”

ROI With Mark W. Sickles:
*Superior returns through sustainable means
*For a 15,000 employee firm:
*$405 million annual increase in sales
*$57 million annual increase in profits
*Up to $1 billion increase in market value.

Projects/Engagements:
*Diagnostic
*Transformation, including
*Education
*Application
*Software Implementation
*Coaching

Summary:
Evolved from a world-class strategic human resource management system, the Mark W. Sickles approach to strategic HRM is a disruptive innovation providing business leaders and HR executives with a breakthrough opportunity to practice world-class organizational effectiveness and strategic management, leading to sustainable value-creation and long-term success. This HRM breakthrough represents a unique opportunity to reduce risk and increase the certainty of controlling your own destiny while becoming a great place to work, buy and invest for your employees, customer, and shareholders.

© Copyright 2008, Mark W. Sickles. All Rights Reserved

What Informed Shareholders Want Compensation Committees To Do

When managed as part of an overall high performance work system that in
turn is part of an overall business system, performance-based executive compensation can serve as a strategic asset and sustainable competitive advantage.
That’s the goal.
(Mark W. Sickles, 2009)

Imagine your CEO kicking off a new business year saying to all exempt employees, “You all have the same elements of compensation as me, and your elements of compensation are linked to the same objectives as mine. This reflects the fact that we all have the same job: Assuring long-term shareholder value.” This is a combination of what two great CEOs – Rob Cawthorn and Fred Poses – said to their workforces to inspire and motivate them to achieve extraordinary results.

These two CEOs understood the most important thing to know about executive compensation: Program changes are well-planned if - and only if - they improve the performance of the whole firm in ways that increase long-term shareholder value. Meeting this standard of well-planned change is a key responsibility of the Compensation Committee, calling for the ability to manage executive compensation as an integral part of a larger whole. Far from easy; requires an imaginative effort; “job one” nonetheless.

Think of compensation as the engine of a race car. Base salary is the metal block, annual incentive the gas, long-term incentive the oil. All three are necessary but not sufficient. The power of the engine cannot be utilized until it is aligned, linked and working interdependently with the other parts of the whole.

Once you view compensation this way – as the engine that powers your organization - you begin to see that the most important of the “Big Three” questions of executive compensation is, “What for?”, followed by, “What kind?”, and then, last, “How much?”. When you don’t have this view of compensation, you could become preoccupied with the last question. Easy to do; requires no imagination; costly derailment. You’ll burn up cash, stock, and shareholder value while your organization goes nowhere fast because you failed to “drop the engine.” Dropping and connecting the engine is much more difficult than filling up on gas and adding oil, but it’s essential to the Compensation Committee being a strategic asset and source of sustainable competitive advantage to the firm and its shareholders.


When you ask these three question - in the right sequence - as members of the Compensation Committee, you need to make sure the answers you get from the officers reflect a masterful understanding of the “significant few” principles of executive compensation:

Risk/Reward
Level/Mix
Fixed/Variable
Short Term/Long-Term
Internal Equity/External Competitiveness
Incent/Reward

As an example:

Compensation Committee: What are we paying our executives for?
Officers: For providing our shareholders with a return on their investment in the current year greater than that being produced by alternative investments of comparable risk; for making moves in the current year to put the company in a position of sustainable competitive advantage in the future; for practicing our shared values in ways that build distinctive organizational and individual character; for behaving legally, ethically and morally.

Compensation Committee: What kinds of compensation are we paying our executives?
Officers: A mixture of fixed and variable. The fixed is low risk pay in the form of
base salary. People will receive a base salary only after they have demonstrated they possess the knowledge, skills and abilities to manage our systems, in our structure, and practice our shared values, all to achieve our operational and strategic goals. They get this fixed element of compensation upon being hired, and will continue to get it until they cease being a member of the firm. This approach demonstrates the linkage and interdependence between our compensation system and our recruitment & selection, training & development, and performance management systems. By managing these systems as an integrated whole, we get more for our money than the competition, and have fewer incidences of costly terminations and replacements. This interdependent linkage is far from easy, and therefore a competitive advantage benefiting our shareholders.

The rest of the compensation is variable, also known as “at risk” compensation. We believe that, because we manage executive compensation as a part of an overall high performance work system (HPWS) that enables us to have a highly skilled, highly organized, and highly motivated workforce, we can skew our compensation towards the variable elements, both short and long-term, to a greater degree than our competition, thereby reducing our fixed cost structure while remaining externally competitive, providing the firm with another competitive advantage . Further, because our compensation system is linked to a well-designed strategic and operational business planning system through our performance management system, you and the shareholders can be assured that our executives will only be paid above-average compensation if the financial performance and strategic gains are also above-average, and that we will be paid less than market rates if our performance as an organization lags the average performance for our industry sector. And because our system assures a workforce tailored to our needs and environment, we are able to push the executive compensation program deeper into the organization than our competition and get an exceptional return on that investment. Doing so improves internal equity and external competitiveness, increases alignment of interest and efforts, and inspires and motivates the workforce to freely and consistently put forth an extraordinary effort. These are all indicators of a high performance workplace.

Compensation Committee: How much should we pay our executives?
Officers: Philosophically, we never want to be paid more than the shareholders feel we are worth. You as the board would not have hired us unless we were of that character. More technically, our pay policy is to target base salary at the 50th percentile of our market, or 45th if you prefer, and then target total direct compensation – base, annual, and long-term incentives – at the 75th percentile. To maintain alignment, we will always set our strategic and operational goals to also be above-average in the industry, creating a high performance culture of “superior pay for superior performance.”

By managing compensation as part of an overall HPWS, we are one of the few companies providing shareholders with a full return on their investment in our pay. When pay is not effectively linked to the overall business system, it can only be used as a “back-end” reward. In this case, the shareholder is only getting “50 cents on the dollar”. But when effectively linked to the business system, as we have done under your direction, compensation can be used as a powerful incentive on the front-end and throughout the business year. Our workforce knows that superior performance means superior pay, and they can see the connection between their daily work and the business goals that define superior performance. As a result, they come to work ever day ready, willing and able to make an extraordinary effort. This high performance environment is rare, valuable, difficult to imitate, and therefore another source of competitive advantage.

Summary:Whenever boards ask questions, it creates work in the organization. When boards ask the right questions at the right time, they can be more effective leading with the question mark than the exclamation mark. You now have a Compensation Committee blueprint to do just that. In doing so, you will meet the standard for today’s corporate director: Functioning as a strategic asset and source of competitive advantage. Good luck.

Copyright 2009, Mark W. Sickles. All Rights Reserved.

MWS Corporate Governance Principles

When people like Peter Drucker, Warren Buffett, and Carl Icahn blame nearly every economic fiasco over the last 70 years on your institution, it may be time to consider a new approach. This is the case with boards of directors and corporate governance. To make this point another way, consider this question:

"How much less shareholder wealth would have been created in 2008 if all the traditional governance experts and corporate directors had taken the year off in 2007?" The fact that this is a ridiculous question cleary indicates that past and present aproaches to corporate governance have not, are not, and will not work. It's time for a change - a big change! We recommend a principle-based approach. Here's three of ours to get you started in the right direction:

Principle 1: Corporate governance is a system made up of interdependent parts. These parts are not like items on a menu you can pick and choose. All are essential to the performance of the whole.

Principle 2: The board of diectors is a governance mechanism available to risk-bearing owners to direct and control decision-making managers. When these managers depart from a principle-based management aproach and destroy shareholder value, boards are malfunctioning as an institution.

Principle 3: Corporate Governance should be regulated to assure a principle-based approach. Anything less is not enough regualtion; anything more is too much.

To learn more abour our breakthrough, wealth-creating, principle-based approach to corporate governance, please contact us at 201-315-3653.

Until then, good luck and good governance.

Mark W. Sickles
Shareholder Value Assurance