Bethanye Blount

When somebody knows that their review is going to directly affect their comp, they are just waiting for you to stop talking and tell them what it says on that piece of paper you’re holding. Simply tell your report from the outset that they won’t be getting their comp change then and there. Then you can open the door for vastly more productive conversations around … [ Read more ]

Bethanye Blount

One of the greatest sources of compensation inequity is that question every candidate dreads: What are you making now? It’s a really common practice, and it compounds a lot of biases. If someone is not a great negotiator, for example, or took a lower salary to work in the nonprofit sector, they’re set up to under-earn for their whole career. The truth is, the last … [ Read more ]

Are Sales Incentives Becoming Obsolete?

To motivate, manage, and reward B2B salespeople, many companies use sales incentive plans that link large commissions or bonuses to individual results metrics, such as territory quota achievement. As digital channels continue to reduce and redefine salespeople’s role in customer buying, these traditional sales incentive plans are becoming less effective at driving sales outcomes.

The right sales incentive plan creates a double win. Salespeople win because … [ Read more ]

Top Execs Eschew Performance-Based Pay

Professor David Lewin says incentives make sense for all employees.

Boris Ewenstein, Bryan Hancock, Asmus Komm

Since only a few employees are standouts, it makes little sense to risk demotivating the broad majority by linking pay and performance. More and more technology companies, for instance, have done away with performance-related bonuses. Instead, they offer a competitive base salary and peg bonuses (sometimes paid in shares or share options) to the company’s overall performance. Employees are free to focus on doing great … [ Read more ]

Compensation at Startups

In the beginning stages of hiring key talent for an early stage company, an engaged founder may spend anywhere from 40-50% of his or her time recruiting key hires. Having a clear philosophy around compensation and rewards is essential to do this effectively. Additionally, you can benefit from access to up-to-date compensation tools and resources to help hire and retain the best talent.

Homebrew has put … [ Read more ]

re:Work Pay Equity Guide

Designing and auditing fair pay practices are steps organizations everywhere can take to create more equitable workplaces. Check out the re:Work guide on pay equity to learn what you can be doing now.

J. C. de Swaan and Neil W. C. Harper

Since standard stock options don’t differentiate between value created by external factors and individual performance, investors may be shortchanged and CEOs may be rewarded regardless of merit and top-performing CEOs may be penalized if their tenure coincides with a bear market. Indeed, McKinsey research shows that from 1991 to 2000, market and industry factors drove about 70 percent of the returns of individual companies, company-specific … [ Read more ]

Louis V. Gerstner

Too often a company’s executive motivation system flies in the face of strategic decision making. This occurs for two reasons. First, good managers tend to be promoted so fast that they never have to live with the medium- to long-run outcome of their plans. Second, incentive compensation is often tied either to short-term earnings performance or to stock-price movements, neither of which has anything to … [ Read more ]

Benjamin Schneider

I like to say that people come to work for money, but they don’t work hard for money. That’s an overstatement, but you get my point — that managers always want to incentivize everything. I think it’s a cop-out to always focus on money as the key to motivation when we have known for 100 years that it’s not the key once you get beyond … [ Read more ]

John Paul MacDuffie

Wharton management professor John Paul MacDuffie cites research which suggests that employees arrive at perceptions of fairness regarding their compensation by comparing the ratio of their inputs — including, for example, their credentials, level of experience and amount of effort put into the job — to their outcomes, including such things as salary and benefits. Under this theory, employees also compare themselves to someone else, … [ Read more ]

John Mackey and Raj Sisodia

In setting compensation, companies consider internal equity (where the compensation system is perceived internally to be fair) and external equity (where the compensation for any particular position is competitive with the external market). Most companies focus primarily on external equity when it comes to executive pay. If they find that a competitor is paying its CEO or chief financial officer a certain amount, they … [ Read more ]

Roger Martin

In football, there is a rigid separation of the real market — the games played on Sundays — from the expectations market, or the betting that takes place prior to the game. No participant in the real market is permitted to participate in any way in the expectations market. If they do, they risk a lifetime ban for even one infraction. There is an even … [ Read more ]

Douglas Conant

A major share of a leader’s salary was linked to long-term compensation, based on total shareholder returns versus a peer group of companies, over a rolling three-year period. That kept people sufficiently focused on the future. I think that kind of balance needs to find its way more fully into the corporate sector. Yes, people need to be rewarded in the short term; they have … [ Read more ]


When you are doing new things in the organization, bonuses are terrible. Bonuses assume that you know where you are going.

Andrew S. Grove

…when you look at the use of stock options, and you look at companies that give 50 percent of their options to the top five officers, you get one picture. But when you look at companies where 90 percent or 95 percent of the options are given to people other than the top five officers, you get the other effect. So stock options are not … [ Read more ]

Michael E. Raynor

If most companies aren’t delivering demonstrably exceptional performance, what is the justification for granting demonstrably exceptional compensation to senior executives? Rare indeed is the pay-for-performance contract that seeks to pay only for performance by separating out the effects of luck from the contributions of the skill and effort of the executive.

Gary Hamel and C.K. Prahalad

In many companies, business unit managers are rewarded solely on the basis of their performance against return on investment targets. Unfortunately, that often leads to denominator management because executives soon discover that reductions in investment and head count—the denominator—“improve” the financial ratios by which they are measured more easily than growth in the numerator: revenues. It also fosters a hair-trigger sensitivity to industry downturns that … [ Read more ]

Nell Minow

You can’t do better than what Warren Buffett said to the people at Salomon Brothers many years ago: “If you lose money for us, we will be forgiving. If you lose reputation for us, we will be ruthless.” You make the situation clear by stating your intentions and you back them up in the design of your compensation program. If there’s any suggestion of bad … [ Read more ]

Daniel Yankelovich

Ordinarily, the US public attitude is generous and open minded toward profits and compensation. If somebody makes a lot of money the response is, “Great, someday it might happen to me.” What drives people crazy is when you make a lot of money at people’s expense. This is a powerful political form of resentment. It’s resentment at being exploited. Americans want companies to make a … [ Read more ]