GR6 – Improving Performance With Variable Pay

Total Rewards and Variable Pay

• Elements of compensation
• Categories of variable pay

Supporting Business Objectives through Variable Pay

• Business strategy
• Business strategy drives business objectives
• Business lifecycle
• Variable pay helps achieve business objectives

Types of Variable Pay

• Incentive plans
  • Short-term incentive plans
    • Profit-sharing plans
    • Performance-sharing plans
    • Individual performancebased plans
  • Long-term incentive plans
    • Equity- and nonequitybased plans
• Bonus plans
  • Referral
  • Hiring (sign-on) bonus
  • Retention (stay) bonus
  • Project completion bonus
• Recognition plans
  • Spot awards
  • Managerial recognition
  • Nominations
  • Organizationwide recognition

Developing a Variable Pay Plan — Phases 1 and 2

• Phase 1: Pre-Design
  • Considering internal and external factors
  • Obtaining management support
  • Identifying the design team
• Phase 2: Design
  • Determining plan objectives and plan type
  • Defining eligibility
  • Selecting performance measures

Developing a Variable Pay Plan — Phase 3

• Phase 3: Funding and distribution
  • Determining performance targets and payouts
  • Funding the plan
  • Distributing plan earnings
• Final approval

Implementation and Evaluation

• Plan implementation
  • Selecting the implementation team
  • Developing the communication plan
  • Introducing the plan
  • Coordinating plan administration
• Plan evaluation
  • Determining plan effectiveness
  • Why plans fail
  • Potential evaluation outcomes