Transparency, sales incentive plans and a new method for executive compensation management

by on June 30, 2009 · 1 Comment POSTED IN: HR Info Center

Use sales comp metrics for your executive compensation management

With the transparency and disclosure, we could do the same thing on executive compensation management. If we get the right peer group, we can say, you’re at the 10th percentile or you’re at the 90th percentile. And therefore, your pay is over or under. So that’s one advantage of the disclosure transparency that’s come about. It’s real easy to rank executives and the performance of the company.

A user-friendly compensation management strategy
I think that’s a great point in terms of ease. But it also allows us to think and kind of pinpoint that design more specifically. We understand what the 10th percentile, the 90th percentile, the 50th, 75th, whatever percentile it is, we can easily identify that because all the information is publicly available.

So it allows us as an organization to redefine our compensation management philosophy. We can be a little bit outside of the box without adding tremendous complexity to the design. For example, we could say for base pay for our executives or for our sales force or across the board in the organization for that matter, we’re going to set our compensation levels for base pay at below market competitive level. Just to make a number up, maybe we target the 25th percentile of performance as where we choose to set base pay.

However, we may set our target total cash compensation levels or our base salary plus short-term incentive levels at significantly above the middle of the market. And maybe we say we’re going to target the 75th percentile. So we’re going to have a true pay for performance model as the core of our compensation management strategy that aggressively rewards performance. But in a year where the company we don’t perform or particularly for individuals who don’t perform, their base pay is going to be low enough that they may choose to find some place else to work.

Edited remarks from the Rapid Learning Institute webinar: “Executive Compensation Trends: New Benchmarks & Changing Regulations” by Edward Rataj and Kevin Nussbaum

1 Comment on This Post

  1. May 2, 2011 - 7:02 pm

    So true! Now its time to research the tools that allow this to happen.


Leave a Reply


Request a Free Demo

We'd love to show you how this industry-leading training system can help you develop your team. Please fill out this quick form or give us a call at 877-792-2172 to schedule your one-on-one demo with a Rapid Learning Specialist.