A rigorous process has become integral to setting appropriate incentive plan targets and ranges. Investors expect incentive plan payouts to be consistent with performance results, which exerts pressure to set appropriately demanding goals. At the same time, with the economy heating up and the war for talent in full force, companies must ensure that the goals are perceived to be attainable or risk losing talent.
This article, originally published by WorldatWork, summarizes best practices to help companies take the guesswork out of setting performance targets and ranges and addresses head-on the rising demand for proper pay-for-performance alignment. The authors provide five key steps to getting pay-for-performance right that range from focusing on the right metrics, to developing properly challenging, yet attainable, targets and ranges, to getting the desired return on investment – all within the context of sound governance.
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Steve Kline, CFA, is a director in the Pittsburgh office who leads Willis Towers Watson’s efforts to develop innovative approaches to pay-for-performance measurement and analysis. Tatjana Ricketts is a senior executive compensation consultant and a member of Willis Towers Watson’s PPM team. Email firstname.lastname@example.org, email@example.com, or firstname.lastname@example.org.