In the last few years an increasing number of advisers have approached our firm to figure out how to align their staff compensation with their corporate strategic and financial goals. Doing so can be one of the most important initiatives your business can undertake.
While few firms attempt to address this critical element of business management, forward-thinking executives realize that they need to structure their total rewards program to attract and retain superior talent and to optimize their personal contributions toward the achievement of their corporate objectives.
So how are you compensating your key team members? Are you providing a quarterly or annual bonus for performance? Can staff earn equity in the business? How are they incented to achieve their personal goals this quarter, or this year? Why should your people care whether or not the business achieves its revenue and profit goals? Do you think your team is so altruistic that they are motivated to make sure you reach your personal income target this year? Or do you really think your team members are concerned at night or on the weekends about what the valuation of the business is right now?
Answer these questions honestly. It’s important. Remember, you can manage activities, you cannot manage results. If you incent the right behaviors you’re in a good position to get the results you want. It’s human nature to act out of self-interest. So aligning personal interest with the achievement of corporate goals is absolutely essential.
A good place to start is by publishing corporate goals and reviewing them with all your team on a regular and systematic basis. The goals should be measurable and quantifiable. And every staff member should know where the business stands in relationship to those goals.
To achieve this alignment, each team member should have personal performance goals that support the enterprise goals. Equally important, each team member should know on a weekly or monthly basis where their performance stands in relationship to their personal goals.
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And aside from financial considerations, you should have a recognition program. Studies have shown that meaningful recognition can be as powerful a motivator as compensation rewards. At team meetings, recognize outstanding achievements. Consider establishing a formal recognition program for sales, customer service, client retention or any other business goals. If it’s important, it’s worth tracking and recognizing. If you link rewards and recognition, and you do that artfully, you have exponentially increased the likelihood of your firm’s success
At Daymark, we’ve helped clients in drafting employment agreements, consulting contracts, incentive plans and employee stock option plans. In several cases, these plans were designed to support the overall business continuation and perpetuation plan we created in conjunction with the proprietors to map out the eventual orderly ownership exit strategy. I am about to help a client create a compensation pool for the top executives and key management personnel to reward them from the proceeds of a sales transaction. It will be comprised of payments from the guaranteed money paid at closing, and from the growth and profit payments to be earned during the three years following closing to provide the team with an incentive to stay with the firm and to optimize the results for everyone’s mutual benefit, including the buyers.
Indeed, it is absolutely essential to make the alignment of personal and corporate goals a win-win for all parties involved.
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