Comp Conversations: Incentive Plans That Drive Business Results

Incentive Plans that Drive Business Results

Eric McMillan, a Senior Compensation Consultant with 20+ years of consulting experience, discusses the relationship between incentive plans and business results. With the close of the first quarter, performance-based pay is top of mind.

Compensation Strategy vs. Business Goals

During our conversation, Eric explained that incentive pay is often based on, but not limited to, metrics related to the organization’s financial goals (e.g., revenue and profit). Ensuring your organization’s compensation strategy aligns with business goals is extremely important, as the two can often conflict.

Incentive Review Process and Goals

To review and analyze incentive-based pay, Eric describes a three-step process:

1. Discovery
2. Internal Review
3. Implementation

Each step is goal-oriented and based on open communication between employees and management. Eric explains the difference between a Short-Term vs. Long-Term goal system, Threshold – Target – Stretch system, and other performance evaluation methods.