Business leaders often wonder whether they can “afford” to have an LTIP. It is a revealing perspective. The assumption is that if you “add” a long-term incentive plan to your pay strategy, you will either dilute shareholder value or lower profits—or both. At a minimum, you’re adding expense to the P&L—and the presumption is that’s not good. Well, the claim I will make (and defend) here is that you cannot afford not to have an LTIP—and you are putting your company at risk if you don’t. Let’s explore why.
CEO success is completely dependent upon attracting and retaining great people and getting them to perform. Years ago, in his book, Good to Great, Jim Collins said it this way: “The executives who ignited the transformations from good to great did not first figure out where to drive the bus and then get people to take it there. No, they first got the right people on the bus (and the wrong people off the bus) and then figured out where to drive it.” (Good to Great, Jim Collins, Harper Collins Publishers, Inc. 2001, pgs. 41-42) The problem nowadays is that many business leaders are either not able to attract the right people to be on their bus or they are losing those people to competitors. So, why is this happening?
March 30, 2018
What if your pay strategy actually made your employees more accountable? Skeptical? “Is that even possible?” you wonder. It is. In fact, I’d go so far as to say that if your compensation approach isn’t driving greater accountability, then it needs repair. It’s probably doing more harm than good.
You are in a final meeting with a new recruit. This person has everything you’re looking for—and more. She has nailed every interview and your whole team is raving about her. You are confident that she will effectively fill a gap that requires strategic leadership and could quite possibly alter the growth trajectory of your company in a significant way. You are about to lay out your offer to her. Question: What are you feeling? Are you confident in what you are about to show her or is your stomach churning because you think she could very well be entertaining a “better” offer somewhere else?
March 14, 2018
At the end of a conversation with a potential client last week, the business leader asked me this question: “If I spoke with companies for whom you have designed compensation plans, would they say their employees are happier as a result of the work you did?” It’s a variation on a theme we are often asked about with regard to the impact of our pay design efforts. I responded, “I hope and believe our clients will tell you we did excellent work and that we exceeded their expectations . I also hope they will say the compensation strategies we helped them implement have created a solid and clear financial partnership with their employees. I believe they would also affirm that they have a more unified financial vision for growing their businesses as a result of our work. But no, I don’t think they will tell you their employees are happier because of the pay programs we helped them implement. That is not a standard any compensation strategy could meet.”
Fairness in compensation is no longer a topic found just in political conversations. And it isn’t restricted to discussions about whether women are paid as much as men for the same job—or if the wage discrepancy between CEOs and rank and file employees is too wide. It has now become a core strategic issue businesses have to address. The good news is that it's not a hard matter to resolve if companies apply the right principles in their approach to rewards. And now, more than ever before, they have an urgent need and motivation to make “fairness" in pay a priority. Namely, their survival depends upon it. Let’s explore why.
February 22, 2018
Much is written about the characteristics of successful chief executives: decisive, adaptable, visionary, intense conviction. What strikes me, however, is that few of the articles published on this topic mention what would seem to be the most obvious quality: the ability to attract premier talent and get them to perform at the highest level. Ultimately, that is what turns companies into winners. If so, CEO success should really be viewed as a byproduct of developing a high performance culture that drives consistent growth. So what separates the best chief executives from the rest when it comes to building that kind of culture?
February 15, 2018
If you are trying to create greater employee engagement within your organization, consider this thought from Alice Zhou in her recent Strategy+Business article: “Emotional energy drives employees to go above and beyond, regardless of external incentives such as compensation and benefits. Specific strengths that are sources of pride within a company feed this emotional energy, which in turn drives people to work harder toward bettering the organization. The sense of pride that comes from this achievement further fuels emotional energy, motivating people to strive for even further success. And so the cycle repeats.”
February 06, 2018
This post should be titled, “See, I told you so!” I’ll explain why in just minute. First note the cover headline below from the February issue of Fortune Magazine. The audience to whom the spotlighted article is directed is your company’s most highly skilled, strategic leaders. The lead-in to the feature article tells them this: “The job market is hotter than ever—and, for those in search of a new adventure, now’s the time to take the leap. Here’s what you need to know to land a new gig that showcases your talents…or to make the job you’ve got even better.”
Unless you have been living on a different planet for the past couple of years, you know that performance management has undergone a transformation. Flexible, agile, forward- looking approaches have replaced old, structured, rearward- facing assessments and reviews. If you are one who has joined this trend, I do not have to tell you that the new methods are no panacea. And they are ever evolving. As a result, in the midst of this change you are likely trying to figure out what to do about your rewards approach—and not finding adequate solutions. And so you are left wondering where your pay strategy fits in this less rigid environment and what role should it should play in helping your performance management system succeed.
January 23, 2018
When you are speaking with a potential new employee, does the subject of compensation ever come up? Or when one of your key people announces she is taking an opportunity at another company, is pay ever mentioned as a factor? Okay, forgive the insulting questions. But with all that has been written in recent years about how small a role a rewards strategy plays in an employee’s performance, engagement and loyalty, I just thought I would ask what your “real life” experience has been. I imagine the truth is that compensation is a huge factor in recruiting and retaining the kind of talent you want. For most business leaders,having a compelling value proposition can make or break their ability to secure the people they are trying to attract--or keep. So let’s stop pretending it’s not a big issue and examine how your compensation approach is impacting your competitiveness in today’s talent market place.
January 17, 2018
In our work with new clients at VisionLink, the most common request we receive is for guidance on choosing an appropriate long-term incentive plan (LTIP). Most of our engagements are with CEOs of private businesses who want to effectively reward those who help create value for the business over an extended period of time. And because they lead companies that are not public, they are often looking for ways to do that without sharing equity. With that need in mind, VisionLink has just produced a new guide that describes nine different types of long-term value-sharing plans and how to determine which one might be right for your company.
Have you ever entered a new year without some thought about how to improve your company culture over the next 12 months? And can you complete that thought without wondering what you need to do next to improve employee engagement? Do you then find yourself asking whether those are really different concerns or one in the same? And then someone brings up the need for creating greater organizational “line of sight”—and you feel like your head is going to explode. In exasperation, you might find yourself blurting out something like this: “Would somebody please tell me how these things are different?”
Not likely. Not because a high performance pay strategy can create a high performance culture by itself, but because without one you discourage your people from fully investing in your vision of the future company you are trying to build. If you want your employees to become growth partners in your business, then you need a pay strategy that communicates that. So, what is a high performance pay strategy and how do you build one?
December 19, 2017
If you lead a company, pay strategy issues will demand more and more of your attention in the future than they have in the past. This is because compensation has become as strategic an issue as any other aspect of your business—and strategy requires leadership. Rewards approaches of the future need to align with the reinventions taking place in performance management and must incorporate the right combination of agility and stability. That will be easier to achieve if some foundational groundwork has been laid. So, as you head into the new year, you would do well to address three critical pay issues that will require CEO leadership—and that will ensure greater CEO success.