57 Posts Found

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 ]

Content: Quotation | Source: Knowledge@Wharton | Subjects: Compensation, Human Resources, Management, Motivation, Organizational Behavior

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 ]

Content: Quotation | Source: Knowledge@Wharton | Subjects: Compensation, Human Resources

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 ]

Content: Quotation | Authors: John Mackey, Rajendra Sisodia | Source: strategy+business | Subjects: Compensation, Corporate Governance, Human Resources

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 ]

Content: Quotation | Author: Roger L. Martin | Subjects: Compensation, Corporate Governance, Economics, Finance

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 ]

Content: Quotation | Author: Douglas Conant | Source: strategy+business | Subjects: Compensation, Human Resources, Organizational Behavior

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

Content: Quotation | Source: strategy+business | Subjects: Compensation, Motivation

…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 ]

Content: Quotation | Author: Andrew S. Grove | Source: Harvard Business School (HBS) Working Knowledge | Subjects: Compensation, Corporate Governance, Management

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.

Content: Quotation | Author: Michael E. Raynor | Source: The Conference Board Review | Subjects: Compensation, Corporate Governance

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 ]

Content: Quotation | Authors: C.K. Prahalad, Gary Hamel | Source: Harvard Business Review | Subjects: Compensation, Management, Organizational Behavior

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 ]

Content: Quotation | Author: Nell Minow | Source: strategy+business | Subjects: Compensation, Corporate Governance, Human Resources

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 ]

Content: Quotation | Source: McKinsey Quarterly | Subjects: Compensation, Corporate Governance

When I look at stock options, I am more and more convinced that in a basic sense, the trouble is not whether you expense or not – stock options are just a bad instrument. They’re so subject to abuse, you want to get rid of them. There ought to be better ways of compensating people. There are better ways. Because the results are so capricious, … [ Read more ]

Content: Quotation | Source: CFO Publishing | Subjects: Compensation, Finance

The logic behind the use of options as managerial incentive is flawed once you consider what behaviors are actually rewarded. Roger Martin, Dean of the University of Toronto’s business school and one of the co-founders of the strategy consulting firm Monitor, noted the problems of mixing the measuring and rewarding of performance in an expectations market – the stock market – with the measuring and … [ Read more ]

Content: Quotation | Source: Harvard Business School (HBS) Working Knowledge | Subjects: Compensation, Organizational Behavior

While financial returns may be a good measure of how well executives are managing the company’s existing assets, they do not accurately reflect executive performance in areas with deferred returns-for example, strategic planning, growth opportunities, business initiatives, or investments in the discovery and development of new products and technologies. It is clear, then, that incentive plans based solely on accounting measures can induce senior management … [ Read more ]

Content: Quotation | Source: Ivey Business Journal | Subjects: Compensation, Corporate Governance

Conventional incentive plans work only with current value, leaving future value-which is often the larger amount-up for grabs.

Content: Quotation | Source: Accenture | Subjects: Compensation, Motivation

Often, performance-based plans are a measure not of an executive’s ability to reach a specific goal, but his ability to negotiate favorable, easily attainable goals with his superiors or the board.

Content: Quotation | Source: CFO Publishing | Subjects: Compensation, Corporate Governance

History will look back on the last decade of executive compensation in the United States as an atrocity. The levels of pay exceeded any historical precedent, bore little comparison with compensation in other countries, and – most importantly – failed to have any correlation with the creation of value for shareholders.

Content: Quotation | Source: European Business Forum (EBF) | Subjects: Compensation, Corporate Governance