Plan Design and Work/ Life Management in Incentive Compensation

Abstract

For many organizations during the bull market of the 1990s, attracting, retaining and motivating highly qualified employees were a matter of offering them sufficiently large stock grants, option grants and/or bonuses. Such is no longer the case. For both the employees participating in incentive compensation plans and the employers who are sponsoring such plans, deteriorating economic conditions have encouraged a more sober view of incentive compensation. With incentive payouts harder to come by, employees are increasingly concerned about three potential problems: being held accountable for goals they cannot attain, opportunities for rewards that are not commensurate with the compensation risk they are being asked to take and managers who are not going to provide the support necessary for them to optimize the opportunities for goal attainment and rewards. As a result of such concerns, there is a renewed interest in the fundamentals of effective incentive compensation. Most notably, there is a renewed interest in the importance of both plan design and managerial support to incentive compensation. This article addresses these issues in detail.