Editor's Note: Part of our job, if we do it well, is to remove uncertainty and ambiguity from rewards where it can and should be done (and correctly discerning where this is true). Dan Walter examines this in today's Classic post.
Have you ever been asked by an executive or compensation committee to create a compensation solution for a problem that was poorly or incompletely described? Nearly everyone reading this has had this happen. Admit it. As you walked away you were probably uninspired even though you may have said yes. That’s because uncertainty isn’t motivating. In fact, when you ask people about their most common driver of procrastination most will say it has something to do with not being certain of how to move forward. The list includes: big projects that require you to delve into areas where you are less than fully confident; complex calculations that require the creation of new formulas or entire tools; dark basements on stormy nights after a blackout; blog articles when you might not have a great idea. You get my point.
Compensation is fraught with uncertainty. Outside of hourly pay and salaries, much of what we do is based on variability (translate that to uncertainty.) The compensation world has lived by the mantra of “attract, motivate and retain” for so long that sometimes we believe just telling our employees that we designed a program to support these goals is reason is enough to make them occur.
Incentive plans, short and long-term, cash and equity based, depend on a level of uncertainty. The point of these programs is for participants to make the potential happen. Our job is to remove as much ambiguity as possible and allow clarity of the potential. One challenge is to make the potential clear without making promises. Another is continuing to have people focus on the potential when the sparkle of the initial rollout is long gone.
When dealing with communicating the potential without overselling, we must take the time to educate. Some of this education should be in the form of tools that allow participants to model outcomes and see the personal impact of them. Other key component is ensuring that each level of management can confidently discuss specific aspects of compensation and properly direct people to the best resources for the answers that are not their responsibility. You may be surprised when you find out how many of your managers either confidently answer questions incorrectly, or create even more uncertainty by not having any answers at all.
Keeping the spotlight on potential for the duration of the program is not as hard as most people make it out to be. Yes, you can have a comprehensive project plan, millions of documents, videos, an intranet, self-serve kiosks and a super cool performance management system. But, the first step is far easier. Talk. Talk about compensation. Talk about the company. Talk about the goals and talk about how all of them fit together to support your company culture and strategy. Then, when the buzz has quieted a bit, talk some more.
Don’t be afraid of the goals that look like they will never be met, talk about them. Don't avoid the plan that has underwater stock options, talk about it. In a world where uncertainty motivates no one create as much certainty as possible to drive success. Are there situations where this won't work? If so, post your comments below and let’s discuss!
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 motivational post.
Posted by: Steve | 05/24/2022 at 03:06 AM