What Incentives Can Do, What Incentives Cannot

Compensation Force

Incentive compensation. Incentives are dangerous, and not just because people game them. Incentives are like that jet engine. Yet incentives are still the first resort of most managers, perhaps because they all think they’re smart enough to create the perfect carrot. How do you know when an incentive plan is a good idea and when it is not? . What follows is my own list of what incentives can and cannot do. Things Incentives Can Do.

Cafe Classic: Compensation Practitioners Should Be Skeptical of Economic Forecasts

Compensation Cafe

Throughout her career, Stephanie has completed research on a variety of topics including wage determination, pay gaps and inequality, and performance-based compensation systems. Base Salaries Incentives/Bonuses Pay for Performance Total Rewards


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Planning for 2022: Incentives, Bonuses, and Variable Compensation

Astron Solutions

As with our review of 2022 compensation budgeting in the last Astronology® , predictions on how variable compensation will unfold are challenging. We explore the impact of these challenges on the continued use of variable compensation in the 2022 total rewards mix.

2021 Compensation Budgeting Forecast Part 2: Incentives, Bonuses, and Variable Compensation

Astron Solutions

2021 has been a year of uncertainty, especially in terms of compensation increase budgeting. As a result, organizations around the country are reexamining their variable compensation strategies and the impact on employee engagement & recognition. Adjust long-term incentive mix.

What is Incentive Pay?

The Incentive Solutions News blog

What is incentive pay? Incentive pay can be defined as a type of variable compensation that is awarded to employees when they have completed a specific set of performance objectives. Types of Incentives. Incentive Pay Examples.

Equity Compensation is Worthless

Compensation Cafe

For more than three decades equity compensation has been considered a necessary and ubiquitous element of pay at start-ups and high-growth publicly traded companies. Large studies have shown again and again that most (85%) equity compensation recipients do not understand their awards.

Stop the $600 Annual Incentive!

Compensation Cafe

As regular readers know, I am someone who does a ton of incentive compensation work. I believe in incentives and their ability to align people with the culture, strategy, and goals of a company. I know incentives work when properly designed and communicated.

Professional Unions in 2031

Compensation Cafe

The current world may provide more balance, but it no longer provides the leveraged upside that some of has had from equity compensation. Dan is also a leading expert on incentive plans and equity compensation issues.

Employee bonus programs: What’s right for your company?


A thoughtful, high-value employee bonus program can help make the difference between struggling to recruit and retain talented employees , and having a workplace that employees never want to leave. Employee bonus programs defined. Types of bonus programs. Performance-based bonus.

Pre-IPO Equity Compensation: Refresh or Change Course?

Compensation Cafe

It’s getting harder to know exactly what to do about equity compensation at pre-IPO companies. All of this is challenging long-used models for equity compensation. As a compensation professional, you have both a unique challenge and a unique opportunity.

Sales Incentives: Farmer, Hunter, Rancher

Compensation Cafe

Everyone who has ever worked on sales incentives has heard people refer to roles as “farmers” and “hunters”. This combination is a new challenge for many compensation professionals and requires a more active partnership between sales leadership and the compensation department.

What Does a Bonus Mean?

Compensation Cafe

Can your employees tell the difference between a raise and a bonus? After all, we often don't make much of a communication effort when we award bonuses. When it comes to bonuses, the understood link with business results is often sketchy, too.

Cafe Classic: The Compensation Cookbook

Compensation Cafe

Editor's Note: Here, for a little midweek fun, we bring you Jim Brennan and his long-awaited, utterly authoritative and instantly gratifying dictionary of compensation decisions. The Compensation Cookbook will solve all your problems. No compensation chef should be without this essential guide to serve up the ideal menu in your café, restaurant, or eatery .

Cafe Classic: The Compensation Cookbook

Compensation Cafe

Editor's Note: In today's post, Jim Brennan serves up his Classic tale of The Answer to our compensation design and practice challenges. . The Compensation Cookbook will solve all your problems. No compensation chef should be without this essential guide to serve up the ideal menu in your café, restaurant, or eatery . Past Compensation Editor of the Personnel Journal and last Senior Associate of pay surveyor ERI , he recently returned to consulting.

Annual Incentive Compensation: A Complete Guide


Annual incentive compensation programs represent an enormous opportunity for motivating employees and executives to do their best work. What Is an Annual Incentive Plan? Long-term incentives can help executives maximize individual performance over not just months, but years.

Is the Purpose of Incentives to Motivate People?

Compensation Force

Article after article tells us that we should halt our use of incentives because people aren't motivated by money. Many of the incentive arguments centered around whether or not money motivates people reflect a wrongheadedness about the role of and reason for variable pay.

Four Compensation Predictions for 2022

Compensation Cafe

I seldom make predictions for an upcoming year because compensation generally evolves so slowly that any real changes take several years to come to fruition. I think we have a unique opportunity in front of us and many compensation professionals will relish the challenge.

Compensation Cafe: Employee Engagement and Incentives Compensation


Last week on Compensation Cafe I blogged: “Is Employee Engagement Moot in Today’s High Stress Work Environments?” Then today, I blogged “The Tricky Business of Incentive Compensation,” examining research on when and how incentives can motivate, given the typically low performance of such schemes. by Derek Irvine. Recognize This!

Compensation Cafe: The Contradiction of Annual Incentives


Incentives are only effective when they match the timeframes of employees’ motivation to perform. In light of a recent Willis Towers Watson report on the ineffectiveness of annual incentives, I wanted to take a closer look at how and why they motivate employee behavior. For me, it was important to start at the very foundation and really look into what we mean when we talk about annual incentives. Bonus & Incentives Employee Motivation Annual incentives motivation

10 Employee Incentive Programs to Engage Your Team


Incentives give employees something to strive for and provide tangible acknowledgement of their great work. When an incentive is offered, 85 percent of workers feel more motivated to do their best. What are employee incentive programs? The value of employee incentive programs.

The Intent to Incent is Our Sun

Compensation Cafe

Incentive plans are one of the most complex aspects of pay and rewards. All of these simply orbit around the most important element of any effective incentive plan. The purpose of an incentive plan can only be absolutely clear if we avoid assumptions.

Variable Pay: Is There a Difference Between a Bonus and an Incentive?

Compensation Today

PayScale’s 2017 Compensation Best Practices Report (CBPR) revealed that nearly three-quarters of organizations give some type of variable pay. Is there a difference between a bonus and an incentive? Under the umbrella you can find any number of bonuses, incentives, commissions, and other cash comp that is contingent on something happening. Bonus” falls under the umbrella. Incentive” also falls under the umbrella. Choosing Incentives or Bonuses.

Astronology®: 2020 Compensation Budgeting Forecast Part 2: Incentives, Bonuses, and Variable Compensation

Astron Solutions

The design and implementation of variable compensation programs continue to grow throughout 2019 and it appears that this trend will continue into 2020. The large influx of millennials into the workforce are causing organizations to re-examine the mix of base to variable compensation in their total rewards programs. The following is a review of the key issues impacting variable compensation strategies in the United States: Salary.Com ( www.salary.com ) 2019-2020 U.S.

Cafe Classic: Hammers, Nails and our Compensation Biases

Compensation Cafe

Editor's Note: We all have our "best way to fix a compensation problem" biases. The law of the instrument is alive and well in the field of compensation, compliments of the biases we all hold. Put in an incentive plan (a.k.a.

Demystifying Compensation with Data-Driven Total Rewards Statements


Attracting great talent has never been more competitive, with companies understandably wanting to provide the most enticing compensation packages possible. The challenge for HR teams is to find a better way to show employees and future employees a more complete picture of their compensation.

Sales Compensation: Chicken or Egg?

Compensation Cafe

I am often asked to “fix” sales compensation programs. Providing a shinier sales incentive program without addressing sales roles, training, and tools accomplishes very little. The chicken should be your sale incentive plan.

Winning the Compensation Triathlon

Compensation Cafe

Watching a few of these events (appropriately sped up) reminded me of the power of a compensation philosophy. Think of the main disciplines like Base Pay, Short-term Incentives, and Long-Term Incentives. Short-term incentive programs are kind of like the cycling event.

Cafe Classic: Aligning Incentives, Performance Metrics and Strategic Objectives

Compensation Cafe

Managers will receive bonuses tied directly to their survey scores. However, a substantial amount of research suggests that incentive pay has attention-directing effects that influence an employee's experience with performance measures.

Compensation Cafe: Promotions, Bonuses, Raises, Recognition – When They Work (and When They Don’t)


You can’t give all employees promotions, bonuses, or raises. My post this week on Compensation Cafe was triggered by it being “the season of giving.” ” Many companies distribute annual bonuses around the holidays, leading me to ponder the best time and use for bonuses as well as the other major reward methods of promotions, raises and, of course, recognition. Recognize This! - They become an expectation and it’s a very poor use of budget.

Compensation Air Traffic Control

Compensation Cafe

The swirl of tasks and requests can make a compensation professional feel more like they work in air traffic control. Compensation can often seem pedestrian, but in times like this, your job may be similar. Dan is also a leading expert on incentive plans and equity compensation issues.

Compensation Practitioners Should Be Skeptical of Economic Forecasts

Compensation Cafe

Throughout her career, Stephanie has completed research on a variety of topics including wage determination, pay gaps and inequality, and performance-based compensation systems. Base Salaries Incentives/Bonuses Total Rewards CCI compensation consumer confidence CPI economic activity economic forecasts employment lagging indicators leading indicators PPI prices

The Baby is Ugly – Compensation Edition

Compensation Cafe

Compensation may be your baby, but sometimes you need to be a bit more honest. Sometimes your compensation baby is ugly. When it’s your compensation programs, be honest, fix what you can, and focus on navigating the storm. I love kids.

7 Current Post-Pandemic Compensation Developments

Compensation Cafe

The past couple of weeks have shown us that compensation in a post-pandemic world may be less predictable than predicted. Equity compensation vesting schedules may finally be changing. Equity Compensation vesting schedules are changing to correct a well-known problem.

Are You Watching the Store?

Compensation Cafe

The pending start of a new business year brings with it both the end and the beginning of the company’s annual management incentive plan cycle. Over time, has your company increased the number of eligible employees/titles for the incentive program?

Cafe Classic: Compensation in Context

Compensation Cafe

I always thought there was a strong connection between compensation and organizational design. I couldn’t “do” compensation unless I had organization charts. I’m going to tell a story that I hope will make you see a parallel to compensation. . Editor's Note: Context matters.

Incentives and The Rule of Three

Compensation Cafe

Designing an effective incentive plan is always a challenge. Over many years I have come to rely on what I call the Incentive Plan Rule of Three. No more than three metrics (KPI), no more than three defined goal levels, no more than three incentive plans for any one individual. Many disciplines have their own Rule of Three, it’s time the compensation industry had a cool magic rule. Most incentive plans use three-level goal setting.

Key Factors to Manage Employee Merit, Bonus & Incentive Plans Effectively


There are many ways to incentive performance in an organization. Typically grouped together under the umbrella term “pay for performance plans,” employers may choose among merit programs, bonus options, and individual or team incentive plans.

Cafe Classic: Excessively Successful Incentives

Compensation Cafe

Editor's Note: In this Classic cautionary tale, Jim Brennan (using the 2016 Wells Fargo incentive disaster as his beginning "case in point") reminds us of how easily even reward plans designed with the best intentions can misfire. Incentives/Bonuses Pay for Performance

Growing a Healthy Compensation Program -- Part Two

Compensation Cafe

We'll identify some of their missteps -- common to companies their size -- then discuss what they can do to achieve healthy compensation habits. Case background: In the first article , we looked at the compensation habits of a company called Healthy Gadgets, a new medical device company that began with fewer than 100 employees. Common compensation practices when a company is growing quickly to at least 500 employees. This is the second article in a series. "If

3 Reasons Great Equity Compensation Creates Great Responsibility

Compensation Cafe

More and more companies outside of the traditional sectors of technology, life sciences, finance are turning to equity compensation to reward their employees. Equity compensation can give companies superpowers. Ironically, equity is typically the least equitable form of compensation.