With our partner Kieran O’Reilly, at Flintlock Consulting
We are all in this together but only a customized approach to compensation will ensure that a sustainable organization emerges!
Executive compensation models tend to focus on two things; retaining the employment of executives and incentivizing performance. Pay design is usually the culmination of years of refinement with a bias toward one or the other influenced by the nature of the industry but always with an eye to what competitors are paying for similar roles.
In other words, organizations take what they can learn of the competitive market to arrive at their own pay targets informed by individual retention and performance concerns. Even amongst private companies delivery of pay (i.e. cash, stock, or units) might be influenced by proxy advisory guidance. In better times conforming to a homogeneous model or following the herd would not normally attract criticism.
There is comfort in perpetuating the status quo but perhaps today’s conditions require reasserting fundamentals. Business challenges will not fall uniformly across organizations that are in even the same industry. One thing the pandemic has taught us is that the old rules, the ones we considered unassailable, no longer apply and now anything is up for change.
We have returned to a time, at least temporarily, where focus and simplicity are for most organizations, the order of the day and complex multi-faceted incentives no longer serve a purpose.
Understanding the relationship between pay, performance, and retention and reasserting their relative importance will be a key element in business recovery. Multiple sources of conflicting costly, pay advice inevitably lead to compromise and mediocrity – not an acceptable outcome when recovery is the prize.
COVID-19 has uniquely impacted all organizations and reappraising organizational direction, how to drive executive behavior (and the reality of immediate threats to retention!) will inform incentive design and the horizon over which they should prevail.
If your inclination is to follow competitive practice while COVID has made resurgence essential, an alternative perspective (with likely lower advisory fees) might be of assistance. Email us here.
Need a Yoda? We can help. We have seen a catastrophe or two and prior solutions will continue to have a role. In the great recession, we worked without fees supporting clients through difficult times. We plan to do so again through telephone consultations, The Recovery blog, The Business Health Council, and our Advisory Board on Demand; a service to CEOs without their own advisory board.
Meantime watch out for or sign up to receive our COVID Comp! blog series.