The role for incentive programs in the development of a total compensation plan is generally accepted as a sound business practice. The more heavily weighted the incentive plan, the more likely the top talent will deliver the desired results. At least this is the generally accepted thinking. In the February 23rd blog of the same title, I stated.
The reasons for incentive plans are logical, and difficult to argue against. After all, you want your employees to be focused and do their best work. However, creating an incentive strategy that drives results without being blindsided years later can be challenging. After all, we’ve all seen incentive plans go bad, which are really Silent Problems, just waiting to happen.
It now appears that corporate boards are beginning to rethink incentive plan programs. Yesterday, Bloomberg reported that Bank of America may increase salaries for investment bankers. It stated, “The concepts we are considering would not increase total compensation,” Brian Moynihan, Bank of America’s president of investment banking and wealth management, wrote yesterday in a memo to employees obtained by Bloomberg News. “Rather, we believe it is responsible, and consistent with the emerging public consensus, that a greater percentage of overall compensation come from fixed base salary… In view of the public concerns about executive compensation, changes in the market, and the need to create a more sustainable compensation culture, all the major financial institutions are evaluating compensation practices,”
Personally, I believe this is just the tip of the iceberg on this subject. Incentive plans are designed to retain top talent. The unfortunate part, once a plan is in place, individuals will align with the plan, not necessarily the values or the long-term objectives of the organization. This is a topic that will remain in the spotlight.
