Do you remember getting having your first teeth come in? I don't, but I have seen it happen and it isn't fun. Often, Pay for Performance can be a similar experience. Of course, it is required for long-term success, but while it’s happening it is painful and confusing. And, you quickly learn the process is nowhere near complete when the teeth have finally come in.
Every compensation professional who has ever worked on an incentive plan has struggled long and hard with figuring out exactly what was to be accomplished, how it could be measured, what levels of achievement were good enough, what levels were actually good and what levels were truly great. We have fought to get our programs understood and approved by the same management teams who requested them in the first place. We have trained managers to support these plans and coach their staff. We have worked to explain these programs to participants in ways that would help them perceive the value of accomplishing the goals set for them. We have watched these programs be marginally successful in the face of great planning and extraordinary effort.
The pain that usually accompanies putting these plans in place can be enough to bring tears to your eyes. The relief when the plan is finally rolled out can be the first time to relax in months.
But, like the infant with new teeth, the work really begins at rollout. It takes time and practice to make things work the way they were planned. Along the way you will occasionally bite into the wrong thing (sometimes yourself.) You must learn from every new experience and push forward even when your tongue hurts from the last errant chomp.
As you master using your teeth, you tend to forget about how important they are in helping you succeed. You forget the time they protected you from an overly aggressive cousin. You can’t remember a time when eating solid food was impossible. You can become complacent. Then one day you are once again in pain after so many years of peace. You visit the dentist and they tell you the lack of brushing and flossing has resulted in cavities that must be addressed immediately.
The same is true for a P4P plan. A new CEO or outside consultant comes in and asks a few questions and we are relegated to guesses and assumptions. The holes in our programs become instantly obvious and everything else gets put aside as we scramble for a quick solution.
It may be obvious that the lack of sleep from my 5-month old son’s teething is causing a collision with my thoughts on compensation. I hope I remember to show him this post when he gets old enough to read (maybe by this summer?) Hopefully, he will start taking better care of his teeth or, at the very least, begin working in the family compensation business!
Dan Walter is the President and CEO of Performensation a firm committed to aligning pay with company strategy and culture. Dan, Ann Bares and Margaret O’Hanlon of the Comp Café were recently honored to have their book “Everything You Do in COMPENSATION IS COMMUNICATION” called one of the “best comp books I’ve seen”, by Steve Browne of HRNet email fame. Dan has also co-authored of several other books you may find useful including “The Decision Makers Guide to Equity Compensation”, “If I’d Only Known That”, and “Equity Alternatives.” Dan welcomes connections on LinkedIn. Follow him on Twitter at @Performensation and @SayOnPay.
Like you, I am a fan for pay for performance. And I appreciate your attempted “teething” metaphor. But I have a different perspective, particularly on the relative ease with which these plans can be implemented. Particularly these two points:
1) “the work really begins at rollout.” No. The work begins in the planning stage, getting the input of all that will be involved in the P4P plan. By getting their input, they both feel appreciated and come to understand the program, consequently raising “buy in”
2) “Pay for Performance is painful and confusing.” If it is, you have already lost. That is why getting input from the troops up front is so important. You want to develop a plan from their perspective, not yours.
I do agree that “You can become complacent.” The P4P plan should be updated and refined each year as part of the annual planning process. It should be an integral part of the high involvement planning process, not a separate compensation activity. If done in this manner, I think you will find that pay for performance systems are relatively easy to implement and tend to be very well received.
Posted by: Bill Fotsch | 02/26/2015 at 08:24 AM
Bill,
Thanks so much for your excellent comments. Regarding your first point, I totally agree that if the diagnosis and design work is not properly executed then no amount of roll-out or support is likely to make a P4P plan work. In fact, we cover this requirement in our book "Everything You Do in Compensation is Communication" (www.everythingiscommunication.com)
Regarding your second point. Until a company has worked through both the compensation side and the stakeholder side of P4P, it can be very confusing. This confusion can be very painful. Once a company understands what drives success and how that aligns with individuals and team, the process becomes far easier.
I agree that P4P can be relatively easy to implement and very well received as long as the programs are well designed, well-constructed, well-communicated, well-executed and adjust to the results received and changes in strategy.
Thanks again for your insight and clarification!
Posted by: Dan Walter | 02/26/2015 at 12:55 PM