How many of the following subjects of importance to your organization?
- Promoting an ownership employee mindset
- Building a high performance culture
- Business growth
- Creating a focus on both short and long-term results
- Competing for top-tier talent
- Employee retention
- Rewarding outcomes instead of behaviors
If you’re like most business owners and executives, your answer is probably “All of them!” Which leads to the next question: What tools are you utilizing to successfully achieve each of these?
- A typical answer is that you have a short-term (annual) incentive plan in place. That’s a good answer, but not a great answer!
- I assume you want your company to be really good, and not merely good. If so, your answer should be that your compensation approach consists of both a short-term incentive plan (STIP) and a long-term incentive plan (LTIP) that work in conjunction with one another to achieve common objectives.
- The underlined portion is where many companies “swing and miss”. That’s because they see STIPs and LTIPs as independent pay components that they design and analyze separately and with different purposes in mind.
- In doing so, they fail to have a reward approach that mirrors the way they manage and drive their company towards the achievement of both their short and long-term results.
A NEW WAY OF THINKING ABOUT VARIABLE COMPENSATION
But how about if you want your organization to be GREAT?
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Recent research shows that incentive plans can be counter-productive if not designed properly. Proper design means the real focus in both short-term and long-term results should be on VALUE CREATION.
Organizations with high performance cultures are recognizing that the most effective approach to variable compensation approach is one that embraces VALUE SHARING. These companies are replacing the idea of “incentive compensation” with “value-sharing compensation.” Under this shift in thinking, the company’s philosophy regarding pay is:
- “We share value with those who help create value. And the more value you create, THE MORE we’re willing to share.”
In Part 2 of this series, we provide additional information about a Value Sharing approach to variable compensation.
- Don’t mistake this as merely semantics or a change in terminology. It’s a mindset change with the potential for powerful impact within your organization!
HOW TRINITY CAN HELP:
Trinity’s Team has extensive experience in custom designing highly effective compensation plans, along with a relevant, short & long-term results driven performance management systems.
For more information:
- E-mail Trinity at info@TrintyHR.net
- Visit our website at www.TrinityHR.net
- Call us at 856.905.1762 or toll free at 877.228.6310
You have HR questions…Trinity HAS answers!