How much are your compensation programs like an analog clock? Analog clocks are some of the most perfect devices ever created. They provide a sense of order and clarity to the world through the use of only two or three lines.
This simplicity allows them to be understood by people regardless of
language. They can be understood by young and old. They provide an exact
or relative reference for wide-ranging and global needs. They have
stood the test of time (no pun intended) and will continue to do so.
But, the simplicity of these amazing devices belies their underlying complexity.
Underneath the simple face and minimalist lines that keep order of our
lives is a quiet and durable set of gears, a power source and something
that is tuned to a fine degree of accuracy. Hundreds of years ago
clockmakers were some of the most skilled and respected craftsmen of
their communities. Clocks were expensive and many relied on a
centralized tower that was the only timekeeper for miles. As technology
improved and became smaller and cheaper nearly everyone could actually
wear one of these amazing devices on their wrist.
Every great compensation plan is simple on its face.
Teaching someone to understand these programs requires little effort on
the trainer’s part and little knowledge on the user’s part. The
components that are visible are limited: instrument used, currency,
timing and reason for payment. The program can be applied across many
disciplines and uses and adapt and evolve as needs require. The trick is
what is underneath the surface.
Too often “simple” compensation programs means simple for the
practitioner as well as the user. We must realize we are the master
craftsmen of our industry. We must understand that removing a difficult
gear in our program will also result in reduced accuracy or preciseness.
Depending on the need of our plans this limited accuracy may be fine
(in fact, it quite often is). We must also be aware of which gears must
be close to perfect to ensure ongoing usefulness. Knowing our craft and
the impact of each and every piece of compensation is the difference
between programs that work and those that don’t.
I think this is often where we fail. We remove the
wrong gear through a lack of understanding consequences, proper systems,
or confidence in our expertise. When challenged by someone outside our
craft (think CEO or BOD member) we sometimes remove or change components
to make them happy. When planning for the management of our plans we
often use tools poorly suited to the task. We must be confident in both
our own knowledge and in the tools we use.
When we put this all together, we must understand which elements must
be displayed on the face of our clock. Does your program need to be a
simple alarm clock or a precise diving chronograph? Too simple and you
are dependent on relative results. (Is “a quarter to nine” accurate
enough for your needs?) Too specific and you may distract from the
purpose of the plan. (Are your requirements specific enough to need to
know barometric pressure or thousands of a second?) In the end, every
element must be understood, or should probably be removed. For this
metaphor to work the compensation plan and compensation professional
must work together as the inner-workings of the “clock”. While
the surface must remain as clear as that of a watch, remember that
simple does not necessarily mean simple for those planning, building and
managing every piece of the program.
P.S. A bit of trivia for you. When you see advertising photos of
analog clocks the time is usually set to 10:10. This is because it makes
the clock face look “happy.”
Dan Walter is the President and CEO of Performensation
an independent compensation consultant focused on the needs of small
and mid-sized public and private companies. Dan’s unique perspective and
expertise includes equity compensation, executive compensation,
performance-based pay and talent management issues. Dan is a co-author
of “The Decision Makers Guide to Equity Compensation”, “If I’d Only Know That”, “GEOnomics 2011” and “Equity Alternatives.” Dan is on the board of the National Center for Employee Ownership, a partner in the ShareComp virtual conferences and the founder of Equity Compensation Experts,
a free networking group. Dan is frequently requested as a dynamic and
humorous speaker covering compensation and motivation topics. Connect
with him on LinkedIn or follow him on Twitter at @Performensation and @SayOnPay