When a company wants to hire a new worker, it will usually hammer out a payment plan.

Not necessarily so when it comes to hiring the chief executive officer, say compensation and succession experts. Boards of directors, which are responsible for filling the top jobs, often enter negotiations with just a sense for what they can afford, leaving them susceptible to overpayments.

"It's like going out and buying a new car" and not knowing your budget, said Dan Fairley, a Minneapolis-based vice president with the health-care group at Clark Consulting, of North Barrington, Ill. "Everybody wants a Mercedes," but not everyone can afford it, he added.

Yet it is an increasingly important issue for boards as investors place more focus on excessive compensation. Poor succession planning has been targeted as one of the main contributing factors of excessive pay in recent years. At a recent conference in Chicago, for example, former Tupperware Corp. CEO Warren Batts said: "Show me a company that does a poor job of succession planning, and I'll show you a company that probably has excessive compensation."

To mitigate the problem, some boards are adopting tally sheets to gain a clearer picture of what they can afford to pay new hires. Towers Perrin has used them in all its executive searches this year, for example, said Douglas Friske, a compensation consultant with the consulting firm. The idea: to ensure reasonable pay options are clearly defined before negotiations begin.

Tally sheets record total compensation, including severance and outstanding stock options. They can also be used to assess compensation based on different pay scenarios, such as changes in retirement plans or pay based on performance.

One recent survey -- conducted by New York compensation consulting firm Pearl Meyer & Partners, a unit of Clark Consulting -- found that roughly one-third of companies had completed a tally sheet this year. Their use thus far, however, has been mainly to assess pay for sitting executives, not incoming executives, said Mr. Fairley, who has been using tally sheets as a succession planning tool for many years.

Of course, tally sheets are just one part of the solution. Proper succession planning is a continuing process that requires companies to do more than know what they are going to pay the next person, said Mr. Fairley. The ability of a company to develop a pool of strong internal candidates is also expected to play an increasingly important role in determining how well a board is managing pay.

One reason: External candidates cost more. Companies generally have to pay 20% to 30% more than they would for an internal candidate, said Mr. Friske of Towers Perrin. That is because external candidates, who presumably already have good jobs, need a financial incentive to leave their current positions for something else. External candidates are also more likely to require employment contracts and severance pay.

While boards often want to look both internally and externally when shopping for a new leader, they need to ensure that they have given their workers the tools to compete with those on the outside, said Mr. Fairley.

Mr. Batts, the former Tupperware chief who is also an active member of a handful of corporate boards, public and private, and an adjunct professor of strategic management at the University of Chicago, said he always prefers an internal candidate to an external one. "I like the devil you know versus the devil you don't know," he said.