Let's face it, business life is accelerating in its complexity. Denial won't help us overcome it; we must embrace it and learn to manage it. As some organizations attempt to "rein it in," they find themselves making things worse rather than better. A recent Harvard Business Review article makes the point this way:
"In and of itself, this complexity is not a bad thing—it brings opportunities as well as challenges. The problem is the way companies attempt to respond to it. To reconcile their many conflicting goals, managers redesign the organization’s structure, performance measures, and incentives, trying to align employees’ behavior with shifting external challenges. More layers get added, more procedures imposed. Then, to smooth the implementation of those 'hard' changes, companies introduce a variety of 'soft' initiatives designed to infuse work with positive emotions and create a workplace where interpersonal relationships and collaboration will flourish."
Our experience has been similar when we are engaged to help companies design incentive plans. Value sharing arrangements such as bonus programs, phantom stock, profit pools, performance unit plans, etc. should bring greater clarity not complexity. Too often, business leaders want their rewards programs to achieve more than they are designed to and become a substitute for performance management. As a result, they add layers of metrics and measures that are intended to micro manage the results the company wants employees to achieve.
If a value sharing program is going to offer more clarity than complexity, what is that it should make clear? Here's our list:
- It should make clear that the company considers the employee a key partner in the achievement of its growth goals.
- It should reinforce the company's business model and the strategy employed to roll it out to the marketplace.
- It should help clarify the role of a given employee in the business model and strategy.
- It should make clear the outcomes the employee is responsible for within that role.
- It should create line of sight between the employee's personal financial vision and the company's growth goals and vision.
If a company will use compensation as a clarifier and reinforcer of "what's important," it will take a big step towards better managing the complexity that inevitably will continue to grow.