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Annual incentive plans add complexity and noise to pay data. Even when you have confidence in the target and actual levels in the survey data it takes real confidence (or ignorance) to make decisions on how the plan pays out in good and bad scenarios. Even with this uncertainty, most compensation professionals do a great job and getting these numbers within a reasonably accurate range.
As I have written before, equity is not about being equal. And as I have covered many, many times before, I am a true proponent of performance-based pay. Call it variable, call it personalized, call it incentive pay. Whatever you call it, I have made the argument that some people should get paid far more than others.
In order for someone to experience loss aversion, they must first value the thing they may lose. A Jeopardy player loses control of the board when they get an answer wrong. They may also lose part of their “bank” if they bet on a “Daily Double” question and answer incorrectly.
Recognition programs can seem like small potatoes when compared to base pay, incentive plans and other elements of compensation. We often forget them while we focus on the “big stuff.” But the strongest performing companies know the secret power of recognition.
This all seems extreme to most of you, but I assure you that there are many brilliant business people whose ideas and futures have trickled away similarly. When a business fails, it is liquidated or simple stops operating.
I like envisioning pay transparency using the idea of windows. There is a great reason we created windows many ages ago. They let light in. They allow us to look out. They can be designed to let in the fresh air, and they can provide coverage for those things not meant for the eyes of others.