One of the things I like to do for fun in my spare time is dive into WorldatWork's annual salary budget survey each year to see if I can tease out any interesting tidbits or trends. (Yes, I know - no need to say it...)
Here is an interesting nugget, featuring five years of high level plan design information from the survey. It examines the prevalence (% of organizations providing) of four different variable pay plan designs: combination awards (based on both individual and organizational performance), organization-wide awards, individual awards and business unit awards. Note that the plans covered here do not include either salesforce incentives or cash recognition.
Combo plans rule. Clearly no other broad plan design choice even comes close. Prevalence ticked up slightly last year (at the expense of organization-wide and individual plans), but otherwise, the combo has stayed at a pretty steady ~70%.
Organization-wide plans retain popularity and nose up in 2012. This year's data shows a slight shift away from combo plans in favor of those that focus solely on organization-wide measures of success, those that throw all their funds at measures of shared achievement. Whether a new trend, a one-time abberation or just a reset back to pre-downturn practice, only time will tell - for now organization-wide plans remain a distant #2 in prevalence.
Individual and business unit awards drift downward. Plan designs focused exclusively on individual performance or business unit performance appear to be very slowly but steadily declining in popularity.
How does this match up with your experience and observations? Other - or different - insights to share?
We see the same trend; it's frequently more dramatic, when focused on particular occupations or jobs. The gross overview is deceptive because it encompasses situations where historical "legacy" incentive plans have increasingly been challenged even as newer more relevant plans have been rolled out. Every enterprise tends to have different trends at different times, too. Nevertheless, the oft-referenced current emphasis on P4P remain universally true, as programs that clearly support organizational survival and best reinforce key contributors are enhanced while plans that fail to meet the more stringent cost/benefit analyses of today are dropped. Money is tight and can't be wasted. Lots of firms are dropping old plans that hemorrhaged money without producing noticable positive results while either adding or restoring more provably cost-effective plans. You are seeing the result of the churn over time.
Posted by: E James (Jim) Brennan | August 22, 2012 at 01:56 PM
We have seen a similar trend in our regional compensation studies and with some of our clients. Companies have stabilized or reduced their base pay fixed expense to reallocate funding for incentive programs that drive performance and results. They are willing to be less market competitive with base pay means and medians so they have the resources to meet or exceed the market on total compensation. Jim's comment about firms dropping old plans for new plans that produce higher returns on human capital investment is on target.
Posted by: Blair Johanson | August 23, 2012 at 08:13 AM
Jim and Blair:
Thanks for sharing your thoughts and experience - interesting that both of you noticed a similar trend.
I agree that what we see in this data is the net effect of a whole mixed bag of circumstances specific to different industries, organizations, business models, etc. But the fact that the net effect seems to be heading in a particular direction does seem to be worth noting and considering.
Posted by: Ann Bares | August 26, 2012 at 01:02 PM
it actually shows pretty big difference!
interesting: something to think about huh?
Posted by: Emily G. | September 06, 2012 at 04:16 AM