We tend to do things the way we have seen them done. Our ice cream is sweet. Our pizza is savory. Our soups are hot. And our pay tends to stay very close to the 50th percentile. While these are all norms, there are alternatives to each. Just because you haven't tried them, or perhaps even heard of them, doesn’t mean the other choices can’t also be amazing.
In Japan, you can find wasabi, squid ink, and garlic ice cream. I have actually eaten garlic ice cream at the Gilroy (CA) Garlic Festival. And while for me it doesn’t beat chocolate, is pretty darned good. In Iceland, you can eat pizza with pineapple AND bananas. It doesn’t sound great, but it can’t be that bad if they continue to make it. I honestly had never eaten gazpacho until I was almost 30 years old. On a hot August day in New York City, I was amazed to learn that what was essentially a spicy tomato smoothie could beat a milkshake as a cool-down treat. And don’t even get me started on the transcendent watermelon gazpacho I had at a place in San Francisco.
None of the above foods had even crossed my mind as possibilities until I saw them. Some worked for me, some I will never try again. A couple completely changed the way I looked at food. My challenge to you is to imagine what your total rewards program would look like if you didn’t have a box from which to base your decisions.
If you pay around the 50th percentile, don’t dream of paying at the 65th. What would you pay people if you were remunerating equitably them for the work they are doing and the value they are delivering. Would pay ranges be far wider? Would midpoints be 20% higher (or lower)?
How much would executives get paid? Would the “market” drive their pay, or would the company’s performance be the only driver of success? Could you get more done with a few higher-paid execs that were supported by a larger and better compensated third tier of Directors, instead of the traditional second tier of VPs?
How would you define the “long-term” nature of your LTI? Is a period of three or four years truly reflective of the long-term goals of your company? Would six or eight years align better? If so, which pay element and associated features would you use to deliver this new approach? How would itbe counterbalanced by the other elements of total rewards?
Once you have done this exercise you will have a better idea of how to evolve your pay. You cannot make the entire thing happen at once, but you can adjust multiple programs at the same time, just a little bit, toward your new ideal. Change is the only true measurement of progress. Changing each program by as little as 5% each year will get you to something completely outside the current box in a matter of several years.
Many of the companies you most admire have been working at this process for a decade or more. It can be accomplished. It can open new opportunities to attract, motivate, retain, and engage your staff. The first step is imagining your ideal program without the restrictions of your current box.
Dan Walter is a CECP, CEP, and Fellow of Global Equity (FGE). He has convinced himself he is a “Compensation Futurist” and works as Managing Consultant for FutureSense. 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.
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