When it comes to incentive and equity plan design, there’s simply is no substitute for effective goal-setting. Compensation plans lose much of their value when measures and goals are not linked to a solid vision of how accomplishing them contributes to the bigger picture. Without it, all you’re doing is creating an elaborate mechanism for spending money– with it, you’re linking performance to value creation.
Value creation is the key to effective incentive plan design. Well-designed incentives are your most powerful tool for focusing and energizing employees, especially managers, on doing their part toward enhancing the value of the business. But value creation doesn’t stop there – every incentive dollar you spend must be an investment in a desired outcome. And every outcome has a value that must be assessed and understood. When you decide how large an incentive payout should be, consider the return on investment; not some static concept like market comparability. Ask yourself “how much is this outcome worth to me?” not “how much do other companies pay a job like this?”
We start broadly with a clear understanding of how you hope your business will evolve over the next five to seven years. Then, we translate that vision into a set of strategic initiatives and work with you to assemble specific measures and goals to support these initiatives. We meet with individuals to better understand their role and contribution toward achieving these goals. Using both a top-down and bottom-up methodology, we ensure each person’s contribution adds-up to the big-picture success you desire.
To be meaningful, goals must describe precisely what you expected from each individual. We define three levels of performance -- Threshold, Target and Outstanding. Coupled with our incentive design methodology, employees not only see the bull’s eye on the target, but the rings around it. This aligns employee performance with business objectives and gets employees focused on the economics that drive the business. In the end, each team member has their own clearly defined and well understood path to success that is compatible with and contributes to overall company success.