Cascading goals in pay for performance make the connection

by on June 23, 2009 · 0 Comment POSTED IN: HR Info Center

The disconnect between individual pay for performance and corporate goals

Typically what you’re going to see in the organization is certainly the senior members are going to be tied almost exclusively to corporate objectives in their pay for performance, whether that be revenue growth, budget, whatever. They’re going to be tied to the corporate objectives.

Cascading goals in pay for performance plans
Basically as you cascade those business objectives throughout the organization then as you get down to the lowest level of pay for performance, you’ll see that those objectives may be solely based line employees individual goals and objectives. But they should still support what the organization is trying to achieve from a corporate standpoint.

So, when you go down through you might say, “Okay the corporate executives are 100% driven by corporate objectives” And then my manager of the production department is driven by 100% individual goals based on the performance of the production department. But again, his budget ties into overall budget of the organization. And therefore his incentive is tied on to what he or she can control.

So, if you look at all of these objectives, basically what we don’t want to do is we don’t want to have individual objectives funding corporate level executives.

And at the same time as you get more and more corporate blend at the lowest level, it’s harder for them to control; it’s harder to get the performance that you’d like from an incentive plan. And therefore, the effectiveness of the plan just doesn’t work.

Edited remarks from the Rapid Learning Institute webinar “Incentive Pay Plan Blunders That Can Cost You a Fortune.” By Kevin Nussbaum and Ed Rataj

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