Compensation: Time for a Termite Inspection!
I live in a house that is more than 100 years old. It was maintained well over the years but, like all old homes, it needs regular maintenance. My neighborhood is filled with many homes built around the same time, and a few homes built very recently. A few months ago, a house a couple of blocks away just disappeared. One day I walked by and it was sitting there, looking resplendent in its new coat of paint, with a “for sale” sign out front. The next week I walked by and there was only an empty lot. It was jarring.
If you have ever bought a home, you have probably experienced the anxiety of a termite inspection. Oddly, this is something that we seldom do when we have been living in a home for several years. It’s as if we believe that termites will respect our ownership and focus only on neighboring houses. This attitude usually prevails right up to the point where something crumbles, or the insects start crawling out of the woodwork. In the case of my neighborhood's missing house the inspection showed that the house was mainly made of paint. The termites had eaten everything important and there was no way to save the structure.
Every compensation professional who has started a position at a new company has experienced their own version of a termite inspection. You get your bearings and immediately dig into everything the prior person did or did not do. You make a list of trouble spots and determine if you can solve the issues with a little bit of targeted work or a bigger process. Sometimes all you find is a nice paint job. Maybe it's a well-written compensation philosophy or handbook, but no real foundation or structure to support the pretty documents.
There is really never a great time to do a termite inspection. But it is far better to do one before the issue becomes unfixable. Like a long-time homeowner, we seem to think that our presence alone is enough to ward off the destructive pests. In reality, the pests do not care if you or I exist. They are only focused on what they need. Our objectives do not factor into their lives. Without regular inspections, we may find we live in a house made of paint.
Luckily, we can build these inspections into our regular compensation calendar. We can even do partial inspections on different elements of pay at different times of the year. The reason for this post now, while you are swamped in COVID-19 response and recovery, is simple. If you look closely, right now, you may see the early signs of an infestation. Maybe your pay programs are not flexing well to remote work. Perhaps your legacy equity grants are no longer useful, or maybe your grant leveling methodology has been exposed as inefficient or ineffective. And, of course, there are the more obvious issues like short-term and sales incentive plans.
Now is the time to evaluate your programs like a new homeowner. The “new normal” is likely to be newer than planned and far, far less normal than desired. Getting ahead of things now may prevent having the house disappear unexpectedly in the future.
Dan Walter is a CECP, CEP, and Fellow of Global Equity (FGE). He is a “Compensation Futurist” who works as Managing Consultant for FutureSense. 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.