6 Ways Incentive Plans are Like COVID-19 Planning
Comparing incentive plans to a pandemic response seems like a stretch, but great incentive plans are all about stretching. Stretching people's expectations. Stretching company performance. Stretching your compensation budget. The list is long.
We have spent a couple of months cooped up in our home-offices / home-schools / home-restaurants / home-newsrooms (and home-homes.) The weeks inside have given me the time to realize the lessons a pandemic team can learn from the perspective of incentive plan design and execution.
If you don’t plan early, great results will depend on hope and luck.If we only knew then what we know now. It is the lament of the late riser, the poor planner, and the grasshopper of Aesop’s Fables. Every good incentive compensation professional knows that the best time to prepare for next year is while you are working on this year. Why would anyone be the person who waits until the last moment to begin designing their solution for the future?
Understand your intent before you create your solution.Every good incentive plan project starts with a simple question. “What are we trying to accomplish?” The best incentive plans have a cascade of prioritized goals. Some are critical, others nice to have. The goal is to make sure the highest priorities are met, and the biggest risks are minimized. When intentions conflict without clear direction the result can be a total failure of the plan.
It’s a bad idea to start acting without testing.This is where many incentive compensation people fall short of their goals. Testing can be hard and time-consuming. It is never perfect. A lack of testing is a sign that you aren’t worried about the plan working. Your best and brightest will see through this almost instantly because they will run their own tests. When we take the time to build dynamic models and involve everyone with a stake, our solutions are more likely to work and far more likely to be supported.
People will want to get out if the plan bad or they feel stuck.The goal of any incentive plan is to provide motivation and support retention through a specific time horizon. Plans that cannot adjust to changing conditions, or that are incorrectly calibrated will neither motivate or retain. In many cases, they will do the opposite. When individuals feel like a plan was never meant to succeed, they will run to someplace with a better solution. The only people you will keep are those who are unwilling to make changes of any kind (and they don’t need an incentive plan at all).
A little miscommunication goes a long way.In a lack of information, people will use their imagination. If you don’t proactively over-communicate your message will be easily overrun by rumors and innuendo that fit people’s preconceived narrative. Is there a feeling that the company has set prior goals to be unreachable? Well, these goals are also unreachable unless you explain how they aren’t.
Transparency works. In the end, people will figure out what really happened. In the end, nearly all people will figure when they have been tricked. If your endgame is to take off before this happens, then any solution will do. If your goal is to be involved for the long haul anything you do to hide real projections, cover-up the intent of the plan, or set unrealistic goals will be discovered. Your best plan of attack is to provide enough transparency for people to make informed decisions.
Getting in front of incentive plan solutions requires doing a bit of work when you may otherwise wish you were recovering from first quarter compensation tsunamis. This year may give you a unique opportunity to proactively plan for your next incentive plans. Or, you may just barely have the time to teach some multiplication, act as your own IT person, perform as a personal chef, and become your own advice nurse. These are odd times indeed. Stay well and reach out if you need help.
Discover the advantages of our compensation consulting services, which we offer to businesses that require outstanding management and leadership to come up with practical solutions during difficult circumstances. Email us as soon as possible at info@futuresense.com.
Dan Walter is a CECP, CEP, and Fellow of Global Equity (FGE). He works as Managing Consultant for FutureSense and has three metaphors for every occasion. 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”, , “Equity Alternatives” and other books. Connect with Dan on LinkedIn. Or, follow him on Twitter at @DanFutureSense.
