"Key Employee" Incentives - Proceed with Care

Many organizations have something in place that they refer to as key employee incentives.  This phrase can, naturally, refer to any number and variety of incentive practices - from an executive to an all-employee plan.  But I encounter it, with increasing frequency, in a format similar to the description that follows. 

Select employees, often those considered "high potential" within the organization, are given an opportunity for incentive compensation.  Sometimes this incentive opportunity is structured around the achievement of specific, pre-defined performance objectives, but often it is more discretionary in nature.  Many times this additional compensation opportunity is part of the initial employment offer, driven by recruiting challenges and needs, and serves as a way to deliver more compensation to a highly desired job candidate.

When I dig around these arrangements a bit - though - in some of the organizations where I do work, I find things that trouble me, including:

• There often are no formal criteria for who is and isn't eligible to participate in a key employee plan.  Eligibility is determined on an ad hoc "as needed" or "case by case" basis.  This introduces possible issues with respect to fairness and potential discrimination.
• These arrangements leave the unspoken impression, to anyone who knows about them (and, trust me, plenty of people do despite any attempts at secrecy) as well as to the participants themselves, that these key employees have a special star status and extraordinary importance within the organization.  While there may be an element of truth to this, ultimately most organizations perform - and succeed - based on the efforts of many, not just the anointed few.  Many of the key employee plans I have seen send a message that flies hard in the face of this important reality.

Does your organization have a key employee incentive plan in place?  If so, what is its stated purpose?  Are the criteria for eligibility clearly defined?  Are the criteria fair and non-discriminatory, and do they reflect the organization's stated values and objectives?  What message (intended or not) does the plan send to participants - and nonparticipants - about how work is done and success created within the organization?

Is this plan a sound, well-considered element of your organization's overall reward program?

Questions worth examining, I think.

Creative Commons Photo: "Caution Tape" by Eugene Zemlyanskiy

Comments

[Wally Bock]

Congratulations! This post was selected as one of the five best business blog posts of the week in my Three Star Leadership Midweek Review of the Business Blogs.

http://blog.threestarleadership.com/2008/09/17/91708-a-midweek-look-at-the-business-blogs.aspx

Wally Bock

[Ann Bares]

Thanks, Wally! Always a privilege to be featured in the Midweek Review. Readers, be sure and check out the link above. Wally does the heavy lifting for you, searching the business blogosphere and highlighting posts he believes you should read.