EEditor's Note: Maybe you’re asking the wrong questions. Dan Walter explains in today's Classic.
I often hear statements like, “Our employees don’t value that. We asked them.” Overall, we have improved our efforts to engage our employees in the participation in new of pay programs, but perhaps we should be asking different questions.
Asking your employees if they want equity compensation or a new type of STI is kind of like asking a two-year old if they want a new kind of food.
The answer will almost always be no.
New food, like a new pay plan, is an unknown and therefore a risk. In a world with so many “knowns,” why risk it by trying something new? This is particularly the case when the new thing is different or hard to understand.
You need to explain the new thing before convincing them to try it. Then you need to confirm that they like it.
Instead of asking people if they want to participate in a stock option plan, or telling them that they should want to be in the new annual incentive plan, think about starting the discussion with the conclusion or results.
Instead of, “Would you like to get stock options?”
Try, “Wouldn’t be great if you could be paid in a way that gives you more money as your hard work contributes to the company’s success?"
Or, “We’d like to find a way to have your pay more closely aligned with the growth of the CEO’s pay over the next few years. Let’s talk about some ways to do that.”
You just can’t expect people to inherently accept something new. You need to guide them into seeing potential solutions from new perspectives. You can start by demonstrating how the new solution is right before you ask them if they would like to try it. Every food my son has eaten (and he eats almost everything) was first consumed by an adult in front of him.
The same is true when discussing new pay with your executives or Board of Directors. You can’t just expect them to support a move from a legacy program to your new cool idea. Unlike you, they haven’t read the articles, taken the classes, and met with colleagues. They haven't been thinking about the solution and working out details in their heads for months. They may not have yet concluded that the current program isn't perfect, or that a new solution may be better.
Blindly asking if they will approve a switch from the current LTI metrics to something else won't work. Telling them that you "need" to change to RSUs from your current Stock Options is unlikely to get enthusiastic support. Try instead to show the goals or objectives the new plan is designed to achieve (go beyond the numbers and dig into the human capital goals). Then show where your legacy programs have strengths and weaknesses and how a new approach will provide better success.
Only then ask the question you need to have answered. "Can I get your support in completing a full recommendation for a new approach that may like this…?" That is when your real work begins, but that's fodder for another article.
Of course, this doesn't work for every tool and every person (some kids are super picky), but you will find it will work for most. And, when it doesn’t, it provides new data on what you may want to consider before the next “ask.”
Dan Walter is a CECP, CEP, and Fellow of Global Equity (FGE). He works as Managing Consultant for FutureSense. Dan is a leading expert on incentive plans and equity compensation issues. He has written several industry resources including a 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.
Nice post.
Posted by: George Egbuonu | 03/29/2022 at 03:20 AM