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12/02/2009

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Awww... shucks. You mentioned our show - THANKS!

I love the post - but I don't think I'd group base pay in the "incentive" category. To me base pay is a quid-pro-quo and not an inducement to do something different. It is a value exchange based on a set of criteria. It is static and typically is measured a macro level.

I know that incentives are also exchanges but they are most often driven toward "above and beyond the base" and also measure at a more micro level (most of the time - always exceptions.)

If nothing else (and something I hope to touch on during today's show) is that there are varying definitions of incentives which cause confusion and circular discussions.

Maybe if we had hard, fast definitions there would be less disagreement?

we've always told ourselves that base pay cannot be an "incentive", but i think that notion needs to be revisited. it is what we decide to make it. the primary reason it isn't an incentive is that most employers play the "peanut butter" game when it comes to base compensation planning - spread it fairly evenly across the board, base it on broad market indicators and internal equity. why can't there be wide variability in base pay distribution during the cycle - why can't an exceptional contributor get 15% and a mediocre performer who needs a kick in the pants get 2%? we over-engineer the hell out of variable comp plans. a good leader should be able to look at a pot of money and divide it up amongst his/her team based on an intimate knowledge of their proportional share of contribution and effort. i guarantee you the end result under that approach will vary minimally from whatever crazy incentive plan scheme you guys can come up with. sorry, but i think mintzberg has this right...

Paul - I do think it's important to use common language, and a more technical defintion of incentive would probably help some of these conversations.

Thanks for taking the time to read and comment.

Charlie - thanks for reading and taking the time to comment. It really helps to keep the discussion going.

I disagree that base pay can be used in the way described for a couple of reasons. One I already listed in the post, it's just too expensive and not a fiscally responsible way to run a business. Also because people's effort and performance waxes and wanes over time. So if someone had an awesome year 3 years ago, but is now just getting by (doing enough to keep their job)they could be making more than your rockstar this year. Where as an incentive program requires you to reearn your money each time.

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