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Ken Gibson
October 26th, 2012 by Ken Gibson

The Future of Compensation

Where is compensation headed in the future and why? It’s a compelling subject for a number of reasons, not the least of which is that pay programs represent the largest budget item most business leaders have to manage.  And the trends so far have American companies paying attention to this issue probably more than they ever have before.  Why is that?  Well…much of it has to do with the economic environment of the past three plus years that has fundamentally altered the way business leaders, employees (or potential employees) and the public (through the eyes of the media) look at financial rewards within the business. Owners and CEOs are worried about locking key producers into high salaried positions. Talent that has been sitting on the sidelines is concerned about coming back into the labor force and getting locked into a salary that is far below what it earned at its peak. And the public (the media) is concerned about “fairness.”  So this leaves everyone looking for effective solutions and asking where this is all headed from here.

To understand where compensation is headed, we must first understand where business is headed; specifically, what kind of people are businesses going to want and need to attract to remain competitive.  The key word in this regard is innovation. The focus on creative energy within organizations both large and small is bigger than it has ever been–and it will only increase in the future.  Pick up any business publication these days and you would be hard pressed to find one that doesn’t have multiple articles on innovation–how it happens, who is most innovative or how to breed greater levels of this quality within a company.  So how does this relate, first of all, to the kind of talent businesses are looking to attract?  Consider this insight offered by Scott D. Anthony in the September issue of Harvard Business Review.  Mr. Anthony is the managing director of Innosight Asia-Pacific and the author of The Little Black Book of Innovation (Harvard Business Review Press, 2012):

“It’s early days still, but the evidence is compelling that we are entering a new era of innovation, in which entrepreneurial individuals, or ‘catalysts,’ within big companies are using those companies’ resources, scale, and growing agility to develop solutions to global challenges in ways that few others can…These companies have pushed into territory that was once the province of entrepreneurs, NGOs, and governments—from delivering health care technology, clean water, and new agricultural capabilities in developing countries to managing energy, traffic, public transit, and crime in the world’s major cities.” (“The New Corporate Garage”, Harvard Business Review, September 2012, Scott D. Anthony)

The trend that this article and others point out has to do with the focus businesses have adopted on hiring entrepreneurial individuals (catalysts) that can leverage the company’s resources to create and innovate. And the article goes on to point out that “Whereas the inventions that characterized the first three eras [of innovation development in American companies] were typically (but not always) technological breakthroughs, fourth-era innovations are likely to involve business models. One analysis shows that from 1997 to 2007 more than half of the companies that made it onto the Fortune 500 before their 25th birthdays—including Amazon, Starbucks, and AutoNation—were business model innovators.”

If you take just these two elements–catalysts and business models–it becomes clear where compensation needs to go if it is going to support the need for businesses to innovate.  Pay strategies need to attract people with entrepreneur capabilities and reward them for leveraging the ability of the company to expand, magnify or otherwise accelerate the virtuous cycles of the company’s business model. Intuition will tell you that this need is not going to be addressed by simply paying competitive salaries or even generous bonuses.  Catalysts are going to seek a compensation structure that will reflect the entrepreneurial experience they are seeking within the business.  They want a stake in the value they help create.  For some, this may mean–at least initially–that they will ask for equity in the business.  And in a certain number of cases, sharing stock might be appropriate.  However, there are multiple ways to share value without sharing equity–and companies will become more and more interested in understanding how that can be done.  At a recent CEO2CEO conference that I attended on innovation, more than one business leader talked about how their companies had developed a venture pool within the business that is awarded to producers that ignite relevant, profitable innovation that further fuels or enhances the business model. Phantom stock, profit pools, SARs, Performance Unit Plans and their variations will also play a larger and larger role in shaping the total value proposition that a “catalyst” employee is offered and will demand.

In short, the compensation of the future will not necessarily involve only new pay “schemes”  that have never been used before, although some such plans are emerging (e.g. the internal venture capital fund just mentioned). Rather, it will be a matter of companies paying more attention to the range of pay elements they combine to create a financial opportunity that matches what the innovators of the future will seek.  It will become both a question of how much those individuals are paid and how that compensation comes to them.

To learn more about the compensation trends for the future, tune into our webinar on December 4 entitled “The Future of Compensation: What’s Next and Why?”

 

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Posted in Business Growth & Compensation, Business Growth and Rewards, Compensation Planning, Current Pay Trends and Topics, Incentive Planning, Key Talent Compensation, Managing Talent, Phantom Stock, Recession Strategies, Uncategorized | No Comments »

Ken Gibson
March 5th, 2012 by Ken Gibson

WSJ–How to Fix Executive Compensation

Recently, the Wall St. Journal ran an article that provides insight into how a company can tailor executive compensation to better  fit a “pay for performance” rewards architecture.  I found myself agreeing with almost everything the author had to say, so determined I’d quote here from the piece by Alex Edmans and offer my commentary (in parenthesis following each excerpt) on the conclusions he draws.

“The secret to reforming compensation isn’t so much looking at how much bosses get paid—but how they get paid.

“It’s easy to understand why critics focus on the gaudy awards of cash and stock that executives take home. And, yes, it’s hard to deny that some bosses get paid a lot more than they deserve. But the structure of compensation is ultimately a lot more important than its level, because it gets to the heart of how managers run companies and create value for shareholders.”

(This has been a core tenet of VisionLink…well, forever. How you pay someone communicates what the company values and the outcomes that are most critical to the present and future success of the business. The structure used for compensation also gets to the heart of how company leaders create value for all stakeholders, not only shareholders. Even if the goal is to multiply wealth  for all primary producers, a business must take a comprehensive approach to how growth is driven in the business AND how risk is mitigated when it creates rewards programs.)

“An effective way to deter executives from taking excessive risk is to compensate them with debt-based pay as well as equity. However, many compensation packages feature only cash and equity.”

(There are many ways to do this. One way we recommend–and that the article goes on to suggest–is through deferred compensation.  Such plans make participants general creditors of the company in the event of insolvency, forcing business leaders to be cautious about putting the organization at risk through overly ambitious transactions or strategies.  It also encourages the development of “good profits” and discourages those that come at the long-term expense of both customers and shareholders.)

“Another critical change companies should implement is to lengthen the time that executives must wait before they can cash in their shares and options. All too often, stock and options have short vesting periods, sometimes as little as two to three years. This encourages managers to pump up the short-term stock price at the expense of long-run value, since they can sell their holdings before a decline occurs. A CEO can, for instance, write subprime loans to boost short-term revenue and leave before the loans become delinquent, or scrap investment in R&D. This is possible since, in many cases, stock and options immediately vest when the CEO leaves the company.”

(A company doesn’t have to be public for this to be an issue.  Most of our work is done with privately held businesses and the focus there is the same.  In addition to the issues described by the WSJ article, people need to feel a sense of stewardship about the future enterprise.  This is more likely to happen when there is a remuneration component that defines a financial partnership between ownership and key producers in the organization. Companies that focus long-term in their compensation plans build a more unified financial vision for growing the business.  In the private environment, we often recommend phantom stock or stock appreciation rights to mitigate against a short-term focus or manipulated outcomes. Vesting schedules and staggered payout periods can help to solve the problems Edmans articulates in this regard. )

“Be flexible. Change the structure of the compensation package as circumstances change. So, for instance, the CEO gets more stock and less cash after the company shares plummet, restoring the CEO’s incentives to boost the long-term share price.”

(Similarly, in private companies, key people can be compensated with more phantom shares of stock during down periods to encourage the regeneration of company value over the long-term.  Bonus payouts can be replaced with additional shares during times when profits have declined and the organization needs to recalibrate its performance.  Short-term value sharing arrangements such as annual “bonuses” can then be revived when the company’s financials return to a normal or more robust status.  At that point, the longer-term plans can release fewer shares or units.  Once the favorable economics have returned, it will be reflected in the value of the shares issued during the downturn–creating the exact economic outcome that kind of program was intended to produce.)

“If companies employ [these] principles…executives will be aligned with the long-term health of their companies. And that will not only help keep individual companies safe, it will reduce the risk of another financial crisis.”

(I agree.)

 

 

 

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Posted in Business Growth & Compensation, Business Growth and Rewards, Compensation Planning, Current Pay Trends and Topics, Incentive Planning, Key Talent Compensation, Managing Talent, Phantom Stock, Recession Strategies | No Comments »

Tom Miller
February 8th, 2012 by Tom Miller

Should You Pay the Way Alaska Airlines Does?

A recent Wall Street Journal article (subscription may be required) highlighted the recent successes of Alaska Airlines—a standout in the struggling airline industry. The article, reflecting an interview with Alaska CEO Bill Ayer, stressed the steps the company has taken to grow value.

The part of the article I’d like to draw attention to relates to the way Ayer has reshaped the compensation philosophy and approach of the airline. I’ve selected one quote (broken into four statements) from the article and added my parenthetical observations. The article quote is in italics. My comments follow each sentence.

As part of its restructuring, Alaska put all staff in the bonus pool. (This is the first strong practice. Don’t limit your bonus plans to managers and supervisors. Get everyone on board.)

Bonuses are based on earnings (70%) and customer satisfaction, cost discipline and safety record (10% each). (Overall, a sound practice. Employees can clearly see what they can do to impact these indicators. I like the emphasis on earnings because it unites employees around the lifeblood of the business. They’ll need to be careful they don’t encourage employees to manipulate behavior just to earn the bonus. This could be counter-productive. As long as they’re careful, they’ve discovered a great formula.)

Each month, the company tells every sales agent or flight attendant how well the company is doing in the bonus categories. (This is rare. And it’s the key to the success of the plan. Few companies devote the time and effort needed to make the bonus plan work. Regular and ongoing communication is the most important step to take.)

We say we want to share generously during really good times, rather than lock in really high wages all the time, says Mr. Ayer. (Several positive things here. First, I like the term “share.” It suggests a partnership relationship. Secondly, the emphasis on modest fixed wages and generous variable bonuses is helpful to prevent high costs in tough times while encouraging meaningful upside during good times. Finally,
note the phrase, “we want to share generously.” The board and leaders have adopted the view that the more they pay the better off everyone will be.

Ayer has captured the essence of how a company can adopt a value sharing philosophy that emphasizes a true partnership relationship with employees. I’m not surprised Alaska Airlines is at or near the top of nearly every industry metric—and that their stock price rose 30% in 2011 while competitors were entering bankruptcy.

How you pay matters!

 

Posted in Business Growth & Compensation, Business Growth and Rewards, Compensation Planning, Current Pay Trends and Topics, Incentive Planning, Key Talent Compensation, Recession Strategies | 3 Comments »

Ken Gibson
September 21st, 2011 by Ken Gibson

“Speaking” of Compensation

I’m departing from my normal “educational” blog today and will be waxing more “informational” this time. Please forgive the slight deviation.

Many who have visited our blog or website have inquired whether we ever speak publicly on any of the topics we blog about.  We do.  In fact, Tom Miller and I have spoken in a number of forums nationally on a range of compensation topics and other themes that relate to driving business growth.  Here is just a partial list of the forums and events at which we’ve spoken:

  • CFO Magazine Convention
  • Inc. 500 Convention
  • Board of Directors Forum
  • SHERM Crossroads Convention
  • Pershing LLC INSITE™ Conference
  • M Financial National Conference
  • American Bar Association Tax Conference
  • Vistage Groups

If you belong to an assocation or other group that needs  speakers on topics that relate to rewards programs or other compensation issues, we are happy to entertain such invitations. Our presentation approach is educational but dynamic.  It is intended to help the audience understand that compensation is one of the largest and most important investments a company makes—and should generate a measurable return for shareholders.

In our presentations, Tom and I help paint a picture of how rewards programs can be used as strategic tools to help fuel growth in a business.  Special emphasis is placed on addressing compensation and business growth issues for business leaders such as the following:

  • The proper role and scope of incentive plans
  • How to measure the return on a company’s compensation investment
  • How to develop an “ownership mentality” within the workforce
  • What alternatives to sharing equity exist for private companies
  • Determining the right amount of compensation and how it should be paid
  • Which type of long-term incentive plan is right for a company

 

In addition to our speaking engagements, VisionLink broadcasts a monthly webinar nationally that any are invited to attend. Our next one will be held next Tuesday, September 27 (8:30 a.m. PDT) and is entitled: Sales vs. Performance vs. Growth Incentives. Feel free to register for that event or view our catalogue of previous broadcasts.

Thank you for indulging me in this departure and soft plug.  I hope knowing this will be useful to many of you.

 

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Ken Gibson
July 15th, 2011 by Ken Gibson

Measures that Matter

Many of the business leaders we work with struggle to find the right metrics for measuring acceptable growth in their companies.  In a recent article at Strategy+Business entitled “Total Shareholder Returns”, authors Ken Favaro and Greg Rotz offer some great insights in this regard.  Although the article addresses issues primarily relevant to public companies, the principles discussed have broad application.  It’s worth the read so check it out.

 Towards the end of the article, the authors make this point as it relates to managing strategy and execution towards improving Total Shareholder Returns:

 “Only two factors determine the value creation path of any company: the distinctiveness of its strategies and the execution of those strategies. We often hear statements such as, ‘A great strategy is worth nothing without great execution’ or ‘I’d rather have great execution with a mediocre strategy than the other way around.’ The reality is that strategy and execution are two sides of one coin. Is Southwest Airlines or Tesco or Wells Fargo the product of great execution or of great strategies? Yes. Both are needed to produce consistently superior shareholder returns.

“What, then, will enable your company to have and sustain distinctive strategies and execution? In our experience, this achievement requires proficiency in both the formal and the informal aspects of a company’s management. On the formal side are corporate strategy, business strategies, strategic planning, resource allocation, performance management, incentive compensation, organizational design, and role of the corporate center. On the informal side are leadership behaviors, peer-to-peer networks, teaming norms and skills, nonfinancial motivators, pride, and a strong sense of the business’s purpose.”

 As it relates to VisionLink’s approach to compensation, we refer to the formal and informal aspects as the “structural” and “mindset” impact of pay decisions.  Much of what this article discusses helps identify the kind of structural issues that need to be properly defined if a strong rewards strategy is going to be tied to them.  If the structure is not properly built, it will  be difficult for employees to understand that to which they are devoting their minds and hearts, and how it will be measured.

For more help on this topic, check out our webinar recording entitled: “How Shareholders Should View Compensation.”

 

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Posted in Business Growth & Compensation, Business Growth and Rewards, Compensation Planning, Current Pay Trends and Topics, Incentive Planning, Key Talent Compensation, Recession Strategies | No Comments »

Ken Gibson
July 8th, 2011 by Ken Gibson

CEO Pay is Up! Is that Good?

Such is the question posed in the lead editorial of the July/August 2011 edition of  Harvard Business Review. It comes on the heels of a report by Equilar, an organization that tracks executive compensation, total pay packages for CEOs at S&P 500 companies.  According to its data, CEO pay rose 28% in 2010, to a median of $9 million.  This brings it back to pre-recession levels.

HBR Editor in Chief, Adi Ignatius, offers some interesting observations in response to this report.  Here, in part, is what he says:

“It’s hard to know exactly how to take this news. On the one hand, it’s a positive economic indicator of sorts, in that a CEO’s compensation tends to be linked to the company’s stock price. The markets saw a strong recovery in 2010; the S&P 500 index, for example, rose 13%. On the other hand, there’s something unsettling about this development. In the immediate wake of the financial crisis, nearly everyone agreed that we had gotten into trouble partly because tying compensation to short-term performance had enriched individuals while putting institutions—and the overall system—at risk. In an interview that begins on page 112, Disney CEO Robert Iger addresses the problem. He made $28 million last year in salary, bonus, and stock options. But Iger concedes that there is too much emphasis, in his and other CEOs’ pay packages, on short-term stock results, and he urges compensation committees to rethink their approach.”

I tend to agree with Ignatius’s thinking on this issue.  The 2010 results certainly reveal that executive pay is a kind of double-edged sword in what it reflects.  At a minimum they demonstrate that any executive pay strategy that doesn’t take a balanced approach to compensation (tempering short-term earnings capacity for key people by placing some long-term compensation at risk) can ultimately be considered “unfair” by some constituency.  Public companies have a harder time with this than private organizations, primarily because of the need to focus on quarterly results.  Meeting the expectations of the analysts is almost their sole focus. 

Both public and private companies need a compensation philosophy and strategy that is consistent with building both short and long-term value.  As I have discussed previously in these blog pages, such an approach keeps a business focused on good profits instead of bad profits.  The latter are earnings that come at the ultimate expense of both the customer and shareholders.  Good profits sustain value and multiply wealth for all stakeholders.

In our approach to compensation design, we recommend companies place a substantial amount of executive pay “at risk” through well designed incentives.  We encourage growth oriented-organizations to offer top tier employees as much as 80 to 100% of salary in incentive earning capacity.  The key is to have approximately half of that amount paid out in short-term incentives (pay for results generated in 12 months or less) and the other half in long-term incentives (pay for results generated past the one year mark, and usually three years or more later).  Salaries should be modest by market standards–usually between the 40th and 50th percentile of market pay.

Such an approach creates a truer sense of partnership between company ownership, key employees, customers and the market in general.  When each of those stakeholders’ interests are represented in the way employees are compensated, greater balance is realized and the compensation wars can subside if not be eliminated.

For more information on the role of compensation in driving shareholder value, view our webinar entitled: “Does Your Compensation Strategy Drive or Hinder Growth?”

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Ken Gibson
November 5th, 2010 by Ken Gibson

Compensation and Strategic Alignment: a Critical Relationship

The most recent edition of the Harvard Business Review carries an article that I recommend, particularly at a time most companies are engaged in planning and budgeting for the new year.  Authored by Robert Simons, it is entitled Stress-Test Your Strategy and it poses seven searing questions companies should ask themselves to home in on critical issues to address in this or any economy:

  1. Who is your primary customer?
  2. How do your core values prioritize shareholders, employees and customers?
  3. What critical performance variables are you tracking?
  4. What strategic boundaries have you set?
  5. How are you generating creative tension?
  6. How committed are your employees to helping each other?
  7. What strategic uncertainties keep you awake at night?

The article points out that a stress test is an assessment of how a system functions under severe or unexpected pressure.  Mr. Simons points out, “By asking tough questions about your business, you can identify confusion, inefficiency, and weaknesses in your strategy and its implementation. As Peter Drucker once warned, ‘The most serious mistakes are not made as a result of wrong answers. The truly dangerous thing is asking the wrong questions.’ ”

With that in mind, I would pose one additional question as a capstone to those listed above:

Do your current rewards strategies effectively communicate to your key people what you want to have happen in each of those seven areas?

If your answer to that question is no, there is important work to do.  I’ve linked two of the questions above to articles and webinars we have recently published that will help you think through how to tie these issues together.

Commit to making 2011 the year you get compensation right and you will create a more unified, passionate and engaged workforce.

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Ken Gibson
October 29th, 2010 by Ken Gibson

A Cadre of Consumate & Generous Professionals

I lead a management society group that puts on a special conference once a year in the Fall.  Entitled, “The Performance Breakthrough Conference,” this event features a keynote speaker followed by a series of breakout sessions on a range of topics, all led by a cadre of outstanding business professionals.  The event relies on the generosity of some in the business community to donate their time on behalf of people looking for tools, resources and/or inspiration to reach the next performance “breakthrough” in their lives, personally or professionally.

This year’s event was held last month.  It was an extraordinary success primarily because of the efforts of our outstanding presenters, each of whom is a consummate professional with significant value to offer.  As an acknowledgment of their contribution to this year’s conference, I’d like you to be aware of them and their businesses, each of whom I can recommend.

Kevin Hall was our keynote speaker.  Kevin is a business coach and wordsmith that has authored an incredible book entitled Aspire.  The book talks about the power of words to transform our lives and understand our true purpose.  Kevin is a nationally renowned speaker who also coaches executives and other leaders on purpose related issues.

Molly Wendell is President of Executives Network, a unique association for “C” level executives in transition.  Molly helped attendees learn about what “Results Oriented” networking is about and how it’s done effectively.  Check out Molly’s website for information on her book, The New Job Search.

Jason Lavin is CEO of Golden Communications, a firm that does web design, search engine optimization and social networking strategies.  Jason also conducts a seminar series entitled Excel-Your-Business, which helps business leaders learn how to optimize the results they are getting from their websites through search optimization strategies and techniques.  He shared that same information with attendees at our conference.

Rod McDermott is co-founder and Managing Partner of McDermott and Bull, an executive search firm headquartered in Irvine, CA.  Rod helped attendees understand how they can best prepare for the “next” career opportunity they are seeking, whether that is finding a job or upgrading their position.  Most of McDermott and Bull’s work is done representing companies that are looking for premier “C” level talent.

Mark Kohler is a partner in the law firm Kyler, Kohler, Ostermiller and Sorenson, a business and estate planning law firm.  Mark is an attorney and CPA with dynamic presentation skills and an unique ability to help navigate complex legal and tax issues, and develop effective strategies for both.  He is an outstanding speaker in high demand.  He helped attendees learn about the issues they should consider when starting a new business.

Kate Peters is a vocal coach that teaches “C” level executives how to become more powerful communicators by understanding vocal dynamics and how they impact one’s image and message.  She helped attendees learn how to “find their voice” and make it heard more effectively in all of the forums where communication is essential.  Check out Kate’s website for information on her book, Can You Hear Me Now?

Please take a moment to pursue the links to these outstanding professionals.  My thanks goes out to each of them for their contribution to our conference and their generosity in sharing their time and talents.

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Tom Miller
July 1st, 2010 by Tom Miller

Should Your Salaries Be “At Market”?

Lots of companies fret if their salaries aren’t “at market.” Should they be? Lots of effort goes into the compilation and analysis of data to determine just how competitive salaries and total comp are.  If people care so much it must be worthwhile. Is it?

Well…yes and no. Of course it’s helpful to know if you have pay levels that are way out of line with market standards. But remember that those standards come from thousands of inputs (some good and some not-so-good) from thousands of people in thousands of companies. Of course, average large numbers can help to weed out the bad data. And if you average different survey sources you again find some “happy medians.” So the data may be helpful, and even reasonably accurate—as far as they go.

But therein lies the problem. Who’s to say that setting ‘median salaries’ is a best practice? Sounds like a ‘median practice’ to me. It seems like the foundational decision should be to determine what the overall pay package should look like. And this should depend on the company strategy and culture. Two examples may help.

In the last two weeks I visited two different clients in different parts of the country. Both companies are successful and growing. Company A has a very aggressive growth culture. Employees are expected to put in a tremendous effort to achieve higher and higher results over time. If they produce the expected results they’re paid well above market. Salaries are already set above market to help with recruting of top talent. Bonuses and other awards push the total comp package to the “Nth” degree. Employees are hired and fired with these expectations in mind. The company personality is designed for high performers with high expectations.

Company B is in a very competitive industries. Margins are tight. Fixed expenses must be watched carefully. Thus, salaries are below market—quite a bit below in some cases. But the company compensates in other ways. The work environment is fairly casual. The culture is very “family friendly.” Sure, some people grumble because pay levels are perceived to be low. But turnover is light. Nobody’s going anywhere. They’re hiring 20 new employees this month. Something must be right about “pay.” 

So the next time you begin your market pay research first ask yourself what the relevance of the data will be. What’s the full story at your workplace? Is market-median pricing an essential for you?

Posted in Business Growth & Compensation, Business Growth and Rewards, Current Pay Trends and Topics, Recession Strategies | 2 Comments »

Ken Gibson
May 3rd, 2010 by Ken Gibson

One Quarter of Your Highest Potential People Plan to Leave in the Next Year

That is not a VisionLink claim.  It’s the claim of Jean Martin and Conrad Schmidt, both of the Corporate Executive Board’s Corporate Leadership Council in Washington, DC, as reported in their Harvard Business Review article–May 2010 edition.  The claim is based on research done by the Leadership Council in September of 2009.  It’s a staggering statistic.

Following that claim, the authors proceed to delineate the six most common errors their research produced that  contribute to this outcome: 1) Assuming that high potentials are highly engaged; 2)Equating current high performance with future potential; 3)Delegating down the management of top talent; 4) Sheilding rising stars from early derailment; 5) Expecting star employees to share the pain, and; 6) Failing to link your stars to your corporate strategy.

That last mistake (not creating links between key people and strategy) is also the basis for three of the 10 core set of best practices  the article goes on to define for identifying and managing key talent.  It is likewise reflective of the central philosophy VisionLink espouses relative the development of World Class Compensation.  Creating great rewards strategies does not begin with a discussion of compensation.  It begins with a discussion of vision, strategy, roles and expectations.  Rewards should be an extension of that train of thought.

Here are three of the best practices identified in the article, and VisionLink’s observations about each.

  • Create individual development plans; link personal objectives to the company’s plans for growth, rather than to generic competency models.

    VisionLink Observation: Compensation in high performing organizations is one of the tools that forges this link and advances a unified financial vision for growing the business.  Employees will understand this connection (between personal objectives and the company’s growth plans)  if they feel a sense of partnership in their business relationship–financially (through pay) and otherwise.

  • Reevaluate top talent annually for possible changes in ability, engagement, and aspiration levels.

    VisionLink Observation: Performance is not static and pay for performance isn’t either.  A compensation philosophy should clearly define what a company will “pay” for and practices must bring that philosophy to life.  Evaluation tools should be employed at least annually to assess engagement and aspiration levels to determine the level of alignment that is taking place.

  • Offer significantly differentiated compensation and recognition to star employees.

    VisionLink Observation: This is the basis of a pay for performance philosophy and the heart of world-class compensation.  Star companies are fueled by star employees. If the business is performing above the market, premier talent will know that, and will expect to be paid accordingly.  If star performance isn’t being achieved, review the previous bullet point.

As companies begin to emerge from the deep sleep imposed by the recent economic slump, they would do well to make sure they are avoiding the mistakes Jean Martin and Conrad Schmidt have identified.  Equally, they should ensure they are well poised to employ the critical components of a world class talent-development program.

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