Ideally, companies align executive compensation with their distinct business objectives and leadership talent development imperatives. They customize program elements, metrics, measurement and mix to address those needs.
Too often, however, companies default to “one-size-fits-all” executive pay models that are based on prevalence and externally defined program standards. How can they avoid conformity and instead focus on driving the kind of performance that matters most to their particular organization?
This article discusses how to use internal business and leadership objectives and considerations as the principal drivers of executive pay program design and delivery. Among the issues discussed:
- Prioritization of lead/driver metrics over lag/outcome metrics
- Use of informed and objective discretion in assessing performance and pay
- Measurement of performance over a time horizon commensurate with the company’s business cycle
- Greater sensitivity of pay outcomes to established performance objectives
- Clear communication, both externally and internally