The Advisors' Blog

– Broc Romanek, CompensationStandards.com

Here’s the intro from this Cooley blog:

Most employers in North America don’t think so, according to CFO.com, reporting on a new survey by the compensation consulting firm, Willis Towers Watson. The survey, conducted in the last quarter of 2015, was directed at 150 large and midsize U.S. and Canadian employers. The survey reached a somewhat stunning conclusion — that only 20% of those employers surveyed “find merit pay to be effective at driving higher levels of individual performance at their organization and only 32% said their merit pay program is effective at differentiating pay based on individual performance.”

Wait, isn’t pay for performance the centerpiece, the focal point, the very heart and key goal of today’s compensation programs, especially executive compensation? Haven’t employers fully embraced pay-for-performance, often at the behest of proxy advisory firms and institutional investors? According to WTW’s global practice leader for rewards, notwithstanding all the time and money invested by employers “in their traditional pay-for-performance programs, primarily annual merit pay increases and annual incentives,…[u]nfortunately, these reward programs are falling short in the eyes of many employers. It appears that organizations are either trapped in a business-as-usual approach or suffer from a me-too mentality when it comes to their programs.” WTW also reports that “employers give their short-term annual incentive programs low marks. Only half say these programs are effective at boosting individual performance levels, and even fewer (47%) say annual incentives effectively differentiate pay based on how well employees perform.”