Over the past two weeks, we’ve discussed how to create a culture of accountability and what is involved in long-term incentive plans. In the final installment of our compensation series, we take a look at some recent trends in compensation and ask “What is your company’s compensation philosophy?”
According to Verisight’s 2014 compensation report, 39% of the surveyed companies either did not have a formal incentive policy or they acknowledged they were below market. In addition, nearly half of those companies did not have a formal salary structure with grades, minimums and maximums.
Where does your company fit in this chart? Are your employees motivated and aligned with ownership? Can you compete for talent without a compensation philosophy?
The next question is what measures do you use for your incentive plans? According to Verisign, the most popular short-term incentive measurements are based on organizational and personal performance.
Most private equity firms believe in regimented compensation structures that tie pay to performance – both short-term and long-term. Because of our laser focus on shareholder value, we can’t afford to have misaligned managers who are not motivated in their current role. Compensation is not only a method of reward, but it also creates an immediate feedback loop between management and ownership.
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