If the process you use to determine an employee’s base pay or incentives is complex, I encourage you to move toward simplicity.

I have worked with employers who say, “The only person who understands how the bonus payouts are calculated is the person who runs the spreadsheet. We talk generally about how the employees’ bonus payouts are calculated but have never shown them an example.”

I have also heard, “The only person who really understands our LTI program is our General Counsel. It is complex and all the documents that explain it are written in legalese.”

Do you think the employees working in these companies are motivated to perform better by the bonus or LTI plan?

No. They receive a bonus or LTI grant, and it isn’t encouraging employees to deliver high performance. Instead, it is a reward that employees appreciate for a short time and then they move on.

Their impact on the size of the reward isn’t known.

Make incentives and base pay simple instead of complex.

Explainability is crucial to your goal of having high performing teams.

Don’t underestimate the need to be clear and concise when you communicate.

Start with acknowledging what your audience cares about and why.

#compensation #communications #hr #rewards #humanresources #pay #paytransparency #payequity #competitivepay #payfairness