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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