In simple form, the following are some of our recommendations as to what organizations should do to avoid these dilemmas:

·        Closely evaluate and improve the means with which external candidates for employment and internal candidates for promotion are selected.  If optimal candidates are selected in all cases, the challenges outlined in this article will be minimized.

·        Ensure that your compensation systems are universally designed to directly impact organizational results with each and every employee. Ensure that the linkage between reward system and results is not "assumptive".

·        Evaluate your performance management and appraisal system to ensure that it is largely or exclusively objectively focused.

·        Ensure that your performance management and appraisal systems make optimal use of multi-rater feedback.

·        Implement a well designed, preferably simple, variable pay system that ties all employee efforts together (executive through front line).

·        Promote and hire only employees who enthusiastically embrace the concept that pay is related to how they and the company perform, rather than separate from it.

·        Never utilize any incentive that is assumed or designed to be discretionary. Connect all payouts to definitively measured organizational results.

·        Drastically minimize or eliminate rewards based exclusively on individual, versus team or organizational, performance.

·        Ensure that at least 51% of all variable pay payouts within the entire organization are derived from results that current customers and prospective customers have noticed.

·        If yours is a publicly held organization, honestly evaluate your stock based reward systems for "stranded compensation" (see our Performance and Reward Systems web site page for further information). The most effective stock based reward systems, through their design, will differentially drive performance during a bear market even more effectively than during a bull market. Bear markets and bull markets will occur, on a cyclical basis, for as long as public markets exist. The key is to have internal reward systems in place that will actually drive organizational performance well beyond market performance, whether bear or bull.

Because some of our areas of specialty are organizational productivity, financial performance, and compensation/performance management system design, please Contact us to subscribe to our web article notification list or call us at 480-467-0344 and we would be pleased to discuss, clarify or expand on any of the above points.