Dare to be Different: Center Webinar Explores Incentives that Fit

When it comes to incentive plans, one size does not fit all. That was the message of this week’s Center webinar on innovative approaches to incentive plan design. 

In part one of our webinar series, we took a fresh look at performance shares and whether they are really appropriate for all companies. This week, we addressed examples of innovation in the market.

Best practice or best fit? WTW’s Zach Georgeson presented recent findings on the life cycle of how best practices become market practices, often leading to unfit solutions. He urged leaders to look at industry dynamics, business life cycle, and strategic priorities and test assumptions. A few examples: 

Align to strategy. Ms. Baker-Nel shared Avery Dennison’s approach, which includes EVA as a performance metric and Market-Leveraged Stock Units tied to TSR. She emphasized agility - as portfolios change, needs change and so must incentives. 

Create line of sight. Mr. Johnson noted that IDEXX believes in the power of stock options as a tool to driver performance with clear line of sight to value creation. He advised continuously assessing programs to avoid falling into complacency.  

Habits of high performing companies. WTW’s ongoing research on the pay practices of high performers found: 

Bottom line: Incentive plans should not be copy-pasted from another company’s best practice. Follow the process of critically examining what you do and why.