Building Unified Financial Visions

What are the purposes behind your compensation programs? For example, why do you pay salaries? Why do you offer bonuses? How about your retirement program? Does it have a fundamental business purpose?

The obvious answer is that no one will work for you if you don’t offer a competitive package? But let’s dig a little deeper. A lot of trouble goes into determining the right levels of pay (market standards and all that). And a lot of work is put into designing the “right bonus plan.” Every total rewards decision is analyzed and re-analyzed. Why?

We could get lots of different answers to this basic question. Here’s mine: to build a unified vision for growing the business.

This answer assumes a few things. First, the business wants to grow. I take that as a given. In this day and age, all businesses must grow to survive. What’s needed to grow? A solid business plan. Capital. People. A commitment to execution. Customer responsiveness. Creativity and innovation. All these and more. How does a business culture capture and produce all these elements? Answer: a unified vision.

You have a unified vision when every employee (well, virtually every employee) (a) understands the business purpose and finds it compelling, (b) sees a personal role and contribution he or she can make to that purpose, and (c) feels accountable for the results. The rewards program, in this formula, is the capstone to the results. Said differently, positive results lead to profits. Profits indicate the employees delivered, to one extent or another, on the business plan. Responsible companies respond by sharing some of those profits with the people who helped generate them. All forms of compensation ultimately should reflect the belief that the employees contributed to something meaningful.

(Note that I”m not strictly referring to “profit-sharing” bonuses or even exclusively to incentive plans. The entire pay budget is theoretically a reduction in profits. Every piece must contribute to the genertion of same.)

In this formula, the incentive plans are not trying to force behavior. Instead, they reinforce valuable contributions. The more unified employees are in understanding the principles behind the formula, the more committed they just may be to delivering on the vision set forth by senior leadership or shareholders.