The Great Christmas Giveaway

Everyone and their brother-in-law will be soon heading out of the office for a well-deserved Holiday break.  Those who remain can look forward to a (usually) relaxed week between Christmas and the New Year.  Time enough away from chirping phones and multiple meetings to ponder where your Compensation function is heading, and do you want to go there?

Approaching the end of the year attention has already begun it's inevitable tilt toward, "what are we going to do next year"?  Compensation managers and practitioners will have their hands full for the next few months, balancing the need to effectively close out this year, while at the same time preparing for the next.

Which is a fertile environment for practitioners to mutter, "I'm so busy.  If our compensation programs aren't broken and in pieces, let's leave them alone. We have other fish to fry." Unfortunately that attitude, while perhaps understandable during a busy time of year, is effectively saying, "let's stay the course.  Let's continue into next year with what we've been doing this year.  Who's complaining"?

The Complaint

But instead, perhaps there should be a shout of alarm (picture me raising my hand from the back of the room).  A basic premise of having effective reward programs (they perform the way they were intended, delivering desired results to employers and employees) is that you need to periodically check.  You need to kick the tires.  Even though your car is running fine today, and tomorrow and even the next day, eventually problems will develop and it will stop running effectively.  That's why you schedule a checkup.

So how do we know that the incentive plans continue to run effectively, aren't wasting money, aren't creating inequities and aren't fostering employee discontent?

Points to Ponder

While you're sipping some Christmas cheer and munching on too many Holiday cookies please take a moment to reflect on what might be considered weaknesses in how you approach transition reward (end of year / start of year) practices.

• Incentive Review Paperwork: You have forms meant to assess performance for your annual management incentive plan (or others).  Does anyone read them?  Is the language consistent with the rating?

• Last Minute Objectives: Annual objectives should have been settled by the end of the first quarter.  If managers are still writing them now, in order to coincide with activities that took place, you have a problem.  You are spending reward monies on self-fulfilling goals.

• Let’s Give Away More Incentives: Have a look-see at who is eligible for your incentive programs.  Because there’s pressure these days to lower the eligibility further into the organization,  increasing the ranks of those being given the “opportunity.”

• Let's Have More of the Same: You're busy; I get it.  But that doesn't mean you shouldn't review the design parameters of your annual incentive plan(s).  To make sure the plan still supports business objectives.  Otherwise you'll simply repeat whatever didn't work this year.

• Win-Win Scenario:  Make sure you spend enough time ensuring that your new incentive plan(s) will have significant payouts only if the company is successful as well.  It's nice to worry about the mechanics of ensuring competitive and equitable incentives for the employees, but if the company isn't winning as well, you're throwing money away.  After all, the plan is (should be) intended to incent employees to deliver a successful year for the company.  There should be no guaranteed payments.

• Leave the Games for the Kids: The payroll costs for an incentive plan are typically very large. As best you can make sure that performance = reward remains your guiding principle.  Avoid the gamesmanship of vague objectives, sloppily written assessments and even manipulation of results to ensure payments.

If something is amiss with your incentive design and administration your employees will know.  They might be silent when ineffective practices benefits them, but will howl like the Ghost of Christmas Past if they feel they're not being fairly treated.

While this may be the season of giving, please make sure that both your company and your employees receive the gift of equitable reward for performance rendered.  That should be a gift that pleases everyone.

Merry Christmas and Happy New Year!

Chuck Csizmar CCP is founder and Principal of CMC Compensation Group, providing global compensation consulting services to a wide variety of industries and non-profit organizations.  He is also associated with several HR Consulting firms as a contributing consultant.  Chuck is a broad based subject matter expert with a specialty in international and expatriate compensation.  He lives in Central Florida (near The Mouse) and enjoys growing fruit and managing (?) a clowder of cats.

Creative Commons image,"Gifts," by steven depolo