Yesterday, we got some good insights on pay-for-performance from Dan Walter, CEP of Performensation. Today, his surprising take on complexity within your pay-for-performance system.
[For yesterday’s Q&A, click here.]
BLR: If it takes a 32-page document to explain your pay-for-performance program, isn’t it too complex?
DW: Not necessarily. One school of thought is the “KISS” concept [keep it simple, stupid]. But the reality is companies are complex, and performance is complex. It’s not as simple as saying we have to hit this revenue goal. If you’re a multinational company with 17 subdivisions and you’re dealing with currency rate changes and different goals and different projects layered on top of each other, it’s hard to say one thing makes you successful.
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The flip side is keeping things too simple can be harmful. There are times when, if it’s too simple, you don’t represent who you are as a company and the goals you need to achieve. With that said, you shouldn’t need a doctorate to figure it out. If your plan is that complex, first of all, it should be simplified to the extent it can be, and second, you need to spend some time every month or every quarter for all 3 years communicating what the program is.
The reality is you don’t learn any difficult topic in the length of a webinar; but a lot of compensation people view things like that. It’s like the 401(k). They do one presentation a year and give people a packet. The average human being can’t understand that.
It would be much easier if you had the same 401(k) person come in every single quarter, and people could come, listen, and talk to that [person] until they understood it, however long that takes. Pay-for-performance, especially long-term pay-for-performance, is like that.
Pay-for-performance is just one of many complicated compliance concerns. Wage and hour laws, compensation makeovers, base pay, variable pay, incentives, increases … compensation and benefits are never easy! “Maintain internal equity and external competitiveness, with benefits and compensation, and control turnover, but still meet management’s demands for lowered costs.” Sound familiar?
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