VisionLink Blog

Ken Gibson

Why Not Have a World-Class Compensation Plan?

I assume that as you approach each new year, you don’t think about your business in modest terms.   Presumably, you have big plans, and are trying to renew your employees’ vision of the possibilities.  Breakthrough growth.  New thresholds of success.  Expanded sales and market share.  Increased profitablity.  Greater shareholder value.

With that vision in mind, you are likely trying to effectively communicate your vision to your key people. You want them to understand why that future is important and how confident you are that it can happen, with their help.  To that end, you might be holding team meetings, sending letters or intranet communications, inviting key individuals to lunch and generally trying to ignite a fire that will translate into execution and results that reflect the potential you have imagined.

Now, with such goals in mind, can you fathom any successful business leader standing in front of his team and giving a speech that goes something like this?

“This year our target is to do about as well as our competition.  We’ve studied what they are doing and hope to mirror their plan as closely as we can.  If we carefully manage expenses and make sure we keep our costs down, we should be okay.”

You are laughing right now, right?  Well, laughable or not, while that may not be the way an owner, CEO or company president approaches the communication of his business vision, it too often reflects his approach to compensation design–the one strategic tool that best communicates the relationship between vision, business plan, roles, expectations and rewards.

To make the point clearer, here are some common assersions or questions we often hear early on in our discussion with  potential clients.

There are more, but you get the idea.  Can you see the obvious disconnect between these comments and a company that is trying to achieve breakthrough performance?

Compensation is usually the largest budget item for a business.  Company cash is going to be used for that purpose one way or another.  The key question is, will  it be used as strategically as every other investment in the business, or will it be relegated  to just another expense that has to be managed? 

If you have applied your energy towards becoming a world-class organization with a clear competitive advantage, why would you not apply the same focus to compensation development?  If you need to attract great talent to become a great company, why would you not offer them a world-class compensation plan?

If you are thinking that “world-class” means expensive (as in world-class hotels, first class travel, etc.), then think again.  A world class compensation strategy might simply be described as follows:

The business is committed to a compensation strategy that is fully integrated with the business plan and offers a clear competitive advantage in recruiting and retaining top talent.

Having an integrated compensation strategy simply means there is a relationship between how people are paid and the achievement of the strategic goals of the organization.  Compensation is an outcome based endeavor.  In a world-class environment, those outcomes might include the following:

In a company with a “world-class” mindset, the speech given by the owner, CEO or president might sound more like the following:

“This year we anticipate having record performance.  Building on our past success, as well as the strength of the greatest talent in our industry, we expect to secure a leadership position in our market space and achieve our most ambitious goals.  You are a critical part of the future of this organization.  We can’t achieve our goals without you.  As a result, I want to make sure you understand the rewards you will enjoy if we can all work hard and achieve the performance levels we have targeted.  This year, in addition to your salary, you will pariticipate in two incentive plans–one short-term in nature and the other long-term.  Both will put you in greater control of  the financial results you can realize if we can achieve the goals we have set.”

Such a speech can only be given by a leader that understands the relationship between performance and pay, and the importance of carefully tying the two together in the value proposition employees are offered.  Such a speech will also attract great people–individuals that relate to the idea of building something and want to know that their contribution is vital.  Such individuals feel valued and counted upon, as a result, they execute differently.

So, as you approach this new year, think in terms of new standards–not just in the goals you set or the initiatives you launch, but also in the way you reward performance.  Build a world-class compensation plan.

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"VisionLink has helped us successfully navigate a number of complex issues regarding our rewards programs. It has dealt with all facets of these varied issues with a high degree of competence, integrity, and straight forward advice. VisionLink's experienced team has consistently delivered first class results in a timely, professional manner and has become a valued Storm partner."

Thomas K. Grzywacz
President/Chief Executive Officer
Storm Industries, Inc.

"VisionLink has helped us successfully engineer a long-term incentive plan that has empowered our company to reward and retain key talent while increasing shareholder value. The knowledge, patience and deep experience of its team members helped us navigate a road that was unfamiliar to us. Ultimately, VisionLink designed a plan that met the high standards of both stockholders and key management employees. We have further engaged VisionLink to address our business succession and transition planning needs."

Reggie Dupre'
Chief Executive Officer
Dupre Logistics

"Over the past several years, National Technical Systems has engaged VisionLink to provide insight and direction on a number of executive compensation issues, as well as a performance evaluation of our 401(k) plan. Under its direction, NTS completely revamped executive level rewards to align with our business growth objectives and the strategic plan of the company. VisionLink's insight and direction have been invaluable. NTS has achieved its growth objectives and our executives feel appropriately rewarded for their performance."

Bill McGinnis
President/Chief Executive Officer
National Technical Systems

"VisionLink arrived on the scene just in time for us. We needed a new framework for our short-term and long-term incentive plans. VisionLink's modeling and forecasting process broadened our horizons and expanded our view of how to use a good incentive system to build, retain and strengthen our senior management team. We remain impressed by their expertise, professionalism and great service."

James Keng
Jimway, Inc.

"Our firm has had a long-term incentive plan for over eight years but we never quite felt like it was firing on all cylinders. We hired VisionLink to re-energize our plan, and they did it! We now have a cohesive awards strategy that's fair to shareholders and valued by our employees. VisionLink's team is technically skilled and very creative. We're happy to recommend VisionLink to firms looking to upgrade their management incentive programs."

John M
FTO Inc.

"Our company was like VisionLink's typical clients. We were great at sales and haphazard at how we compensated our people. VisionLink's process brings great clarity and confidence to our growth planning - and makes compensation a great growth capability."

Dan Sullivan
Founder and President
Strategic Coach ©

"The team at VisionLink helped our company structure a long-term incentive plan that parallels the company's strategy for continued growth as a global market leader within our industry. Their approach resulted in a program that our corporate team and executives embraced on both a professional and personal basis. Through VisionLink's guidance and execution, we were able to create both a motivational tool for current team members and a recruiting device to attract future executive level associates. Well done!"

Mark Rhoades
Fluidmaster, Inc.

"As a leading direct seller of scrapbook photo albums and supplies, Creative Memories has independent consultants across the country. And for over six years now, VisionLink has helped us to stay connected and administer a voluntary 409A non-qualified plan for them. VisionLink has provided support for all aspects of our plan from notification of eligibility through registration and distribution. The VisionLink support team has offered suggestions for improving processes and provided us with outstanding service year after year."

Guy Walker
Creative Memories North America

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