The Advisors' Blog

This Semler Brossy article asks, “Should compensation be a quiet validation of outcomes or a loud rallying cry for change?” It posits that the second most common reason pay programs fail — even though designed to drive strategy — is because the company doesn’t use the pay design to effectively communicate priorities. Here’s an example:

A retail chain emphasizes “increasing the percentage of online sales” for its executives, but the targets are set at 90% achievement rates. Since the percentage is easily achieved, these bonuses become an entitlement, not an incentive.

Between the two communication approaches, when is one better than the other? It concludes:

Go prominent when strategy is changing—turnarounds, new business models, M&A integration—or when performance has plateaued and you need a behavioral shift. Prominent programs also work when employee surveys show confusion about priorities, when the market is forcing existential choices, or when you need the entire organization rowing in the same direction on 1-2 critical outcomes.

Go quiet after you’ve hit strategic milestones and need to steady the ship, or when employees report ‘compensation fatigue’ from constant plan changes. Choose this approach when operational execution is solid, strategy is stable, and over-communication risks making pay feel engineered or manipulative. Quieter programs also make sense for large, stable workforces in low-growth environments—when the needle doesn’t move much, focusing attention on pay may not be the best use of organizational energy or management bandwidth.

The immediate action item for this time of year is to make sure communication is part of your 2026 compensation planning:

Before your next compensation committee meeting, ask one question: Are we designing incentives to be heard, or hoping they’ll speak for themselves? Boards that treat this as a strategic oversight question—not just an implementation detail—are far more likely to see compensation actually drive the behavior and focus they intended.

– Meredith Ervine