Variable Compensation

Variable Compensation:
Creating a Stake in the Outcomes with Cash and Equity

High performing companies have one thing in common – they create opportunities for their people to share in the success they help create. Variable compensation programs can be powerful mechanisms for linking an organization’s strategy with the actions of its people. Whether the compensation is for teams or individuals, an entire organization or a specialized group, for short-term or long-term performance, delivered in cash payouts or stock options, it is critical to align what is needed with how people are rewarded.

Variable pay programs are increasing in most organizations. They are becoming more formalized and less based on the discretion of a manager. They are extending to lower levels, and the performance measures are becoming better linked to individual, group and organizational success. Organizations that use variable pay programs enjoy an effective competitive advantage in the marketplace, because their people understand what is critical for the business to succeed and know they will be rewarded based on those achievements.

Determining the Right Approach for Your Organization:

The Wilson Group can identify what is needed for your variable pay programs to succeed. Our assessment tools and analysis can assist you in determining whether a variable pay program will have the desired impact on performance. We examine measurement systems, management commitment, performance management practices, culture and trust, and other factors that are essential for success. While there are many approaches available, our goal is to find what will work in your organization. We help you find the balance between conflicting pressures. We serve as design experts, educators and facilitators for our clients. Our knowledge of – and ability to apply – tools, methodologies, best practices and frameworks are based on the experience of successful companies. As a result, we create high-impact variable pay programs, while helping clients develop their internal capabilities to manage and improve these programs over time.

What the Wilson Group offers:

By working in a collaborative fashion, often with internal design teams, we can develop programs that will work to link your strategy with your people. Our expertise includes:

  1. Assessment of current practices or conducting research of your competitor’s practices.
  2. GoalSharing – a proven approach to developing variable pay plans.
  3. Targeted key contributor or project based incentives.
  4. Targeted stock option or equity simulator programs.
  5. Variable pay for new ventures and spin-offs.

By working with the Wilson Group, you can realize benefits that go well beyond financial returns. You can increase the focus of your people on key performance issues, and strengthen their commitment to success throughout your organization. This will enhance your ability to compete and to succeed in a dynamic marketplace. Remember: Be careful what you measure and reward – you will surely get more of it.

Client Illustration:

We developed an integrated variable cash compensation program for two merging manufacturing companies. The project scope ranged from the top executives to all employees. The new model was built on the best practices of each organization and defined clearer metrics, competitive payout targets, and mechanisms that simplified and integrated the plan globally. The process not only accelerated the development of the new organization, it enabled the company to retain the critical leadership and technical talent needed to implement the firm’s new global business strategy.