The Advisors' Blog

This is how most companies create compensation programs: Determine the company’s strategy and then figure out a way that best incentivizes folks (from execs to rank-and-file workers) to advance that strategy. The first installment of a three-part series (kicked off last month from Semler Brossy) looks into 3 situations where the opposite happened:

[S]ometimes—quite surprisingly—the process works in reverse, and compensation discussions uncover gaps in underlying premises, leading to important and deep discussions that clarify strategic intent.

What’s notable in all three of these case studies is that the conversations around comp metrics were exposing areas where the board did not have enough or the right information to determine key objectives for compensation for the next year given the current state of the business. As described in the “Healthcare Hustle” case study:

As the conversation progressed, it became clear that there was insufficient clarity in their strategic planning discussions on how the activities could be coordinated to achieve profitability. The renewed focus led to discussions about how the company could improve its processes . . . to reduce costs, improve payments and increase profitability. It also led to productive discussions about where to focus new membership growth and how to integrate new members into the organization to drive higher margins.

The rest of the series will cover how compensation impacts talent decisions and compensation’s impact on changing how work is done. As someone who finds human motivation deeply complicated and fascinating (and as a proponent that intrinsic motivation (vs. extrinsic) is the way to get sustainable results), I’m looking forward to seeing what they have to say on the matter.

— Meaghan Nelson