Compensation and Incentive Structure Planning

Recently, an article from the Financial author Brad Cherniak addressed the expanding issue of how to determine the right way to handle compensation and incentive measures for small-to mid-size organizations.

What incentive and compensation measures have your organization taken up in the recent past? What tactics seem to work best for your employees? It’s been widely discussed recently that non-monetary benefits are some of the best tactics for today’s workforce.

When you begin to build the compensation and incentive structure for your organization, there are several key aspects to keep in mind. Remember that there will eventually be conflict in regards to the structure and that over time, your tactics will need to shift to keep up with change. The article supplies a few key aspects of creating a new structure to keep in mind:

– Economic benefits should be outcome-driven and allow players to make their money at roughly the same time.

– Performance incentive, which is task-driven and considers the type of behaviour a company wants to encourage and what performance metrics are tied to the value of the company – high performing companies monitor and tweak this aspect continuously.

– Governance and control – who is driving the bus? Who should be?

– Cash, which is liquidity-driven, both for employees and the company, but in the early stages everyone should stay lean and hungry.

Overall, the main thing to focus on is cohesive alignment of incentives, actions and outcomes. There will be problems, there will be ups, there will be downs – Expecting this will help keep things in line. The best thing to do is be versatile. If one part of your compensation plan doesn’t seem to fit later down the line, eliminate it … but try to keep the cost of these mistakes to a minimum. To read more about how to create a useful incentive and compensation structure plan for your organization, click here to read the full article.

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