How Good is Your Pay for Performance Program? August 20th, 2009

Sean Conrad

I recently read a post on executive perks from Ann Bares at Compensation Force with a great deal of interest. The piece discusses the changing climate of executive perks and shares info from the Wall Street Journal/Hay Group CEO Compensation Study. The study reviewed the practices of a sample of 200 companies with revenues of $5 billion of more.

My main point of interest was about what the top executive perks were. The top five include: personal use of corporate aircraft, financial/tax planning, company cars/allowances, tax gross ups and personal physical exams. Sweet! Where do I sign up for my weekend getaway to Sonoma this fall, and how can I guarantee I don’t have to wait in line at the doctor’s office with 30 germy people? In all seriousness, the WSJ/Hay study findings indicate that even in the current economy, some of these perks will remain. Notably, they expect the personal physicals, along with aircraft access and company cars to stick around because they offer a security and productivity benefit to the company.

On one hand, I understand that executives that have the experience and skills to lead a $5 billion company are hard to come by, and that these are viewed as standard perks. To effectively manage in tougher times, the leadership and vision of those executives is even more important. On the other hand, let’s say this company has made tough decisions and has cut positions and some general employee perks. Employees are going to be more willing to accept that execs are still taking the corporate jet, if they see some changes in the C-suite, and the company upholds their commitment to key talent management programs like pay for performance. Joe or Jolene employee can’t be the only one taking the “hit”; they need to see their leaders doing it too, albeit on a different scale.

While your pay for performance program may not offer anything close to the perks discussed above, on the whole, it’s a valuable initiative that when properly executed, keeps employees focused on achieving their goals. The reward for hard work shouldn’t be simply “keeping your job”, while your CEO jets off to the Caymans for a retreat, but seeing that the company is recognizing employee achievements at all levels of the organization. While some firms may look at pay for performance as a nice to have, it’s really a core talent management program that can help companies to stay the course during troubled times.

For more on how pay for performance initiatives can work well, have a read of David Creelman’s white paper and let us know what you think.

Tags: pay for performance, talent management