Building Unified Financial Visions

I remember working for an organization years ago that established a stock option plan. At the end of the year I received a letter from some finance VP whom I’d never heard of notifying me of the number of options I had received. I had no idea why I had received them, or why I received the number I did. I shrugged my shoulders and said, “Ok, that’s great.” But it did nothing for my sense of connection with the company and its mission.  If anything, it made me realize how stupid their pay programs were.  What’s that called? A negative return on the compensation investment.

 A recent article in Employee Benefit News pointed out some simple truths about employee engagement. Did you know that companies with high levels of employee engagement produce significantly higher returns for shareholders than those with lower engagement scores? Large companies have recognized this for a long time. But smaller companies overlook this vital connection to productivity and profits.

 As a compensation consultant I’ve observed that incentive plans simply don’t work without meaningful levels of employee engagement. When employees don’t feel connected to the business mission and purpose they are more likely to view a bonus plan as either (a) an entitlement, or (b) a manipulation scheme. This is the main reason that most bonus plans don’t work. Employees want to perceive the bonus payment as the natural result of contributing to the well-being of the organization. And they also want to see the connection between their role and the company’s success.

Top performing companies pay attention to employee engagement levels. Engagement is the contribution employees make to the partnership relationship with the employer. And incentive plans should be viewed as the employees’ share of the partnership returns.

(Tip of the hat to my wise friend Doug at the Fast Growth Blog for pointing me to the article in EB News)