Today’s post is one of the simplest and most important reminders I can share. Incentive plans are one of the most complex aspects of pay and rewards. We can get caught up in trends, technical details, behavioral economics, psychology, and communications. All of these simply orbit around the most important element of any effective incentive plan. Our sun, if you will, is the overarching power of WHY.
If you know exactly why you have a specific incentive plan, then you can actually design, communicate, manage, and administrate that program correctly. The intent of the plan must be strong enough to have enough gravitational pull to keep every other component in its place. Defining this intent requires regular questions and very thoughtful listening.
The intent of the plan must also shine bright enough to light up everything else no matter the location or time of year. A well-defined intent serves as the theme of every communication. It drives every modification and provides a defense for any flaw. The purpose of an incentive plan can only be absolutely clear if we avoid assumptions.
Focusing on the intent of a plan makes it easy to ask questions about things that may even be complicated or unfamiliar to you. Certain KPI, metrics, and goals may be well outside your scope of expertise. That doesn’t mean you can accept or ignore their inclusion in a plan. Ask for clarity about the why and how each detail, or requested feature, supports the agreed-upon intention of the plan.
If the answers to your questions seem dubious or lack confidence or explanation, push back. IN the end, you are the compensation professional and it is your expertise that is required to build and deliver the solution. When a software engineer asks for details on a key feature they will often push back if the benefit does not seem to warrant the effort. They will push back if building the feature will cause them to delay other features. Mostly they will push back if the feature does not seem to support the primary goal of the software that is being built.
This type of questioning and editing is not always expected from a compensation professional, but it as much our job as it is the software engineer's. When each of us builds a solution founded on a specific intention, the result is clearer to the user, and easier and more efficient to design and maintain. When you design your next incentive plan, spend as much time as needed to get everyone to agree on the intent. With this simple, and critical component you can deliver an incentive plan that lights the way and serves to spur your future growth.
Dan Walter is a CECP, CEP, and Fellow of Global Equity (FGE). He works as Managing Consultant for FutureSense and has three metaphors for every occasion. Dan is also a leading expert on incentive plans and equity compensation issues. He has written several industry resources including the only resource dedicated to Performance-Based Equity Compensation. He has co-authored ”Everything You Do In Compensation is Communication”, “The Decision Makers Guide to Equity Compensation”, “Equity Alternatives” and other books. Connect with Dan on LinkedIn. Or, follow him on Twitter at @DanFutureSense.
Yes, I agree wholeheartedly, Dan. Thanks for reminding us and saying it so well.
Posted by: Frank Giancola | 05/14/2020 at 07:58 AM