Private Companies Struggle with Success Criteria for Compensation Strategies

IRVINE, Calif. - Aug. 6, 2013 - PRLog -- Most organizations struggle with how to measure the success of their pay programs, according to Ken Gibson, senior vice president of The VisionLink Advisory Group, a compensation consulting firm headquartered in Irvine, CA.  As a result, many companies end up drawing the wrong conclusions about the effectiveness of certain pay plans or they prematurely abandon some approaches all together. This creates a need for organizations to find a way to better evaluate success when it comes to financial rewards, the firm leader said.

“Compensation is about more than salaries and incentives.  Done right, it defines a financial partnership that links ownership’s vision with the vision of employees,” Gibson explained.  “Ultimately, it should create a unified financial vision for growing the business. For that to happen, every pay plan needs a clear role. Success occurs when each strategy fulfills that intended role.”

Given the importance of this issue to so many businesses, VisionLink will be broadcasting a free webinar on August 27, 2013 entitled, “How to Measure the Success of Your Compensation Strategy.” (More information and registration for this event can be accessed at: http://www.vladvisors.com/business-growth-strategies/even...)

According to Mr. Gibson, compensation plans should be viewed as strategic tools that are primarily intended to communicate to employees “what’s important” to the organization.  They give proportion and timelines to priorities and place a value on their fulfillment. They should also reinforce a person’s role in the business model of the company and what that individual’s financial stake is in meeting the expectations associated with that role.

“While the metrics associated with some specific pay plans might be tied to company performance, it isn’t the compensation plan’s job to achieve that result,” the pay expert said. “It is a simply a mechanism for defining the financial partnership that exists between the company and the employee when roles are fulfilled. And here’s the key, it is also (or should be) a gatekeeper that protects shareholders from paying out value before it’s actually been created.”

Gibson went on to explain that, in the end, most organizations need help in avoiding the pitfall of “unintended consequences” with their pay strategies when trying to ensure their success.  They need individuals or consultants that have experience with multiple options for solving key business barriers and can guide the process in a way that leverages the strategic outcomes that are achieved. 

“The right questions need to be asked and appropriate challenges need to be made to solutions being considered that don’t adequately address all the ramifications of implementation of one rewards strategy or another,” Gibson summarized. “With that approach, companies can be more assured that each of their compensation plans fulfills its proper role—which is the definition of success.”