OMG! You Were Right All Along!

untitled11Remember that time you spent weeks modeling a new incentive plan only to have it shot down? They explained that any goals needed to be based on RESULTS! You maintained that the reason interim goals were included, was to ensure that success could be achieved and communicated throughout the process.

Remember that other time you explained to your managers that they needed to have frequent conversations on the new pay for performance program? And, when it didn’t work they told you Continue reading

Why Equity and Not Just a Bigger Salary?

6a0134836082f8970c01bb0904b74f970d-200wiThis February, the Harvard Business Review published Stop Paying Executives for Performance” by Dan Cable and Freek Vermeulen. The basis of the article is that we do away with all executive incentive pay and replace it with high (in cases much higher) salary. Their argument is that there is no evidence that pay for performance works and some evidence that it is dangerous. Since this post is part of my ongoing “Stock Options on the Precipice” series (earlier articles: 12345678, 9, 10, 11), I will try and focus only on that one aspect of incentive pay. Perhaps some of you will add additional information in the comments.

Note: We are not arguing that top managers such as CEOs should be paid less. That may very well be the case too, but that’s not the focus of our analysis. HBR , Cable, Vermeulen, Feb. 2016

Let’s start with the premise that pay for performance does not work. There is Continue reading

“Employee-Friendly” Equity Compensation

6a0134836082f8970c01b7c82ab74a970b-200wiIn this sixth installment of my “Stock Options on the Precipice” series (other articles: 1, 2,3, 4, 5), I will cover some common concerns employees have about equity compensation. The term “employee-friendly” equity compensation has become popular over the past couple of years. What does this mean and do the people using the term actually understand the purposes and technical issues surrounding equity compensation? More importantly, is there equity compensation that isn’t employee-friendly? Lastly, what should you be doing about it?

Part of the inspiration for Continue reading

Equity Compensation: I Have the Cure You Seek!

6a0134836082f8970c01b8d1aeb429970c-200wiIs your equity program on the fritz? Are your stock options in the dump? Could your RSUs use a bit more pep? Are your stock appreciation rights feeling a bit more like wrongs? I have got the cure for what ails you!

Like the snake oil salesmen of yesteryear there is always someone pitching some unique feature or approach that will solve all of equity compensation’s potential problems without having any side effects. And, just like the people who purchased those sometimes poisonous and sometimes pointless solutions, the buyer had better beware!

Welcome to another installment in Continue reading

Employee Stock Options on the Precipice?

6a0134836082f8970c01bb08b4abc0970d-200wiI am declaring February “Stock Option Month” at the Café (at least in relation to my posts). For more than 20 years I have been directly involved in the ebb and flow of employee stock options. When they are great, they are the best. When they are not great, they can be truly destructive. I will call it right now. We are, once again, on the precipice of the downfall of stock options. Consider the headlines below. Continue reading

Turtles Confirm that Incentive Pay Works!

Jan 25 6a0134836082f8970c01b8d1966614970c-200wiThe discussion regarding the efficacy of incentive compensation is ongoing. So many questions, seemingly so many answers! Does it focus people on things that you find important? Does it trump autonomy, mastery and purpose? Does it make a difference even when it isn’t the main component of pay? Will people jump through a few hoops if there is a reasonable prize at the end?

A group of turtles answered yes to all of these questions.

We tend to think of incentives as based on Continue reading

Incentives Without Teeth

6a0134836082f8970c01bb08a76bbb970d-200wiPay for performance continues to grow as a solution for motivating people in a world of flat compensation. The title of this post probably had you thinking about incentive plans that required real goals to be met before payment was earned. Maybe you thought about one of your programs where people got paid even when performance wasn’t great. While these are common themes in motivational pay, this post is about an entirely different kind of teeth.

As a Continue reading

Our Nearsighted Friends and Us

12022015 6a00d83451df4569e201b7c7f4012c970b-200wiI have a brother with 20:15 vision. For those of you normal humans, this means he can see things clearly in the distance that the rest of us see as only a blur (if at all). I have a sister with, to be kind, worse vision. Like many people, her vision imperceptivity worsened over decades. She began to think it was normal to see street signs only as she came close to them. It did not seem odd that she depended on her experience rather than her senses. And, simultaneously, most of her friends were also slowly losing their ability to see into the distance so they didn’t notice anything changing.

Perhaps the world of executive compensation and all of our friends have slowly become nearsighted.

A recent New York Times Continue reading

IN MEMORIUM: FAREWELL ANNUAL RAISE

untitledAn article was published last week with data from Aon Hewitt and Towers Watson that showed the annual pay raise is essentially dead (and in Towers Watson’s case, bonus pools will also be underfunded). The data apparently shows that we will deliver base pay as a flat amount going forward. Increases in pay will come from incentive plans, if they are funded. Let’s cast a fond farewell to a method of pay that has existed for as long as people have been paid.

Thankfully, we Continue reading

Speed, Velocity and Acceleration in Pay

untitledI was reading a Facebook message a parent posted about their kid’s physics homework and it resonated as a reminder for the compensation world. The question was how do you explain the differences between speed, velocity and acceleration. A few years ago, I wrote an article about Newton’s Three Laws of Compensation Motion and I guess it’s time for another physics lesson.

Speed is a point on a graph. It tells you a whole bunch about an instant. Much of the data we use in compensation is like this.  We know exactly the amount or percentage, but we have little information regarding the path to that point. We feel like we somehow already have this information, but in most cases it’s a deception. Most pay data provides as little Continue reading