Winning the Compensation Triathlon
Being locked up at home for the past nine months has given me the time to watch some videos that wouldn’t have made the list in a normal year. The rabbit hole of streaming information recently brought me to a series of videos on triathlons. Watching a few of these events (appropriately sped up) reminded me of the power of a compensation philosophy.
Three key disciplines must be navigated, swim, cycle, run. There is also fourth, stealth discipline that can be found in transitions. Think of the main disciplines like Base Pay, Short-term Incentives, and Long-Term Incentives. Our fourth discipline that is often the difference in winning or losing is Communications.
You need to be good in every discipline, but the winner is usually truly great in a single discipline.
It often feels like most companies have simply given up on base pay. Most simply run with the pack and hope that their short-term and long-term incentives will make the difference. This may be a potential lost opportunity. Triathletes view every discipline as a potential strength. You will never see a pack of winning competitors swimming, or running, at the 50th percentile. Every discipline is viewed as a way to win.
In fact, the swim event is the first in every triathlon because it allows the elite to separate from the pack. This, in turn, ensures weaker cyclists cannot draft behind stronger athletes. A leading base pay program makes it more likely your other programs will be more effective.
Short-term incentive programs are kind of like the cycling event. The speeds are fast, and the results are generally clear. And, like a short-term incentive plan, the biggest risk is the exhausting sprint to the finish. Tired riders can crash while taking big risks to make up lost time close to the finish. Building in a softer-landing can improve results.
Finally, they run. While the bike ride may be longer in actual miles, the run is longer in perception. You are tired when you begin. The finish line cannot be clearly seen. You must commit to keeping running even when you cannot see your competitors. You must run fast, but not so fast that you run out of energy before the final finish line. There are tons of videos showing runners on wobbly legs being passed while the finish line is in view.
The most important lesson I learned was about the fourth discipline, the transitions. These periods between each section are where the best are the best. It takes time to change out of a wetsuit, or put on a pair of padded shorts, or running shoes. The best strategize as much on what’s in between as they do on the actual disciplines.
There is an important lesson to be learned here. The best compensation philosophy, supported by the best designed and executed programs, will often lose to stronger messaging and understanding. Great communication isn’t a “nice to have”, it is an essential discipline that needs the same effort and commitment as three main components of total rewards.
One last thought. There is no way I will ever compete in a triathlon. I am confident in my lack of ability in those disciplines. It is also fine that many people choose to participate with no intention of winning. Just competing and finishing is far more than I would ever attempt.
Participating with no chance of winning is also fine in the world of compensation. If you only have the budget, or executive support, to be in the pack it’s OK. If this is the case be honest with your executives and employees and set expectations accordingly. Even when you cannot win, your communication transitions can set you apart from the others in your class. Spend more effort there and you can still win your battles for talent and success.
If you have any queries regarding human resource functions, capital compensation as supplemental pay, or incentives for workforce strengthening, get in touch with FutureSense - Human Resource consulting. Our area of expertise is managing your pay structure to recruit and retain the finest employees for your business.
Dan Walter is a CECP, CEP, and Fellow of Global Equity (FGE). He 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.
Posted by DanFutureSense on 12/29/2020 at 08:41 AM in Base Salaries, Compensation Communication, Compensation Philosophy, Executive Compensation, Incentives/Bonuses, Pay for Performance, Sales Compensation, Stock/Equity Compensation, Total Rewards | Permalink
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