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Oh, I miss compensation plan philosphy and design discussions. With federally mandated pay scales, special salary surveys are about as much "open" discussion I am able to engage in - and even that is guided by a few too many rules :(


Why doesn't the award increase in the same way as the target e.g., 110% of target equals 10 percent pay increase. Is there some research that backs your formula?




I hear you! My sympathies for the "too many rules". May it not always be so.


As I mentioned in the post, the difference in the "speed" of increase between performance and award is referred to as "leverage". Leverage is supposed to drive performance via increased upside for good performance (and, usually conversely, increased downside for performance below target). The formula I showcase here reflects "typical" leverage in non-sales incentive plans - which is backed up not only by my consulting experience and the experience of other compensation consultants I have worked with, but also the Hay research that I referenced in the post. But please note that the decision whether to use leverage, and how much leverage is appropriate, are not questions that research can answer for you - but rather judgment calls by management regarding the plan design that will yield the best outcomes, given a sound assessment of the situation and all the factors at play.

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About The Author

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    Compensation consultant Ann Bares is the Managing Partner of Altura Consulting Group. Ann has more than 20 years of experience consulting with organizations in the areas of compensation and performance management.

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