In pay for performance, give everybody a stake in the outcome.

by on June 26, 2009 · 0 Comment POSTED IN: HR Info Center

Make sure all of the team members have a slice of the pay for performance pie

Charles Schwab designed their incentive plans around pay for performance, but really around a stake in the outcome. They have all their employees to participate in the pay for performance plan and have an opportunity to share the success.

At Schwab, they want to stay away from individualized incentives in pay for performance plans. One thing they had to make sure is make sure their compensation system lined up with the value of the company.

At Schwab, they’re an investment advisor. So, they don’t want to be paying people to push products onto customers because in many cases, you want to make sure your advice to the customers is what’s appropriate for the customers.

So, their pay for performance program’s focused on really how do we pay people for hitting their objectives, but in a way that it’s compatible to what our customers are doing.

There’s a lot, as we’ve said, about a giving people the stake in the outcome.

If you take a look at the Southwest Airlines, another one of the great companies that we see out there.

Everybody in the company is in an employee profit-sharing plan, because it helps give them a stake in the outcome, so that improvements in the company, they’re directly impacted by the companies.

Well, from an incentive point of view, we actually like to see it go fairly deep. Again, if we’re trying to give a stake in the outcome, it’s useful if we can give a stake in the outcome.

Ultimately, if you get everybody in a profit-sharing plan, they, at least, have some kind of stake in the outcome.

Edited remarks from the Rapid Learning Institute webinar: “How to Avoid Incentive Pay Plan Disasters” by Steve Player

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