- Cal Barber, Independent Compensation Consultant, Professor & Consultant, Seneca College of Applied Arts and Technology
- Chuck Csizmar, Principal, CMC Consulting Group
- Cindy Xing, Independent Compensation Professional
- Jeffery O’Leary, Manager – Performance & Planning, Maple Leaf Foods
- Jerry McAdams, Author
- John Brockman, Director Compensation, SuperValu
- John Rubino, President, Rubino Consulting Services
- Kieran O’Reilly, Managing Partner, Flintlock Consulting
- Scott Busch, Vice President Total Rewards, Samuel, Son & Co.
- Steven Osiel, Vice President Compensation & Incentives, Accompass, Lecturer at the University of Toronto
- Trista Brudnick, Executive and Relocation Services, Reward Service Delivery, John Hancock/Manulife
- Employees struggle to identify the link between their actions and the short-term incentive plan (STIP), resulting in payouts that do little to focus employee behavior or drive a pay-for-performance culture.
- A STIP is a key part of the Total Rewards offering and is critical to compete for talent in today’s tough labor market.
- Many STIPs incorporate too many performance measures, overcomplicating the plan and making it nearly impossible for employees to understand.
- Your STIP can’t be everything to everyone – align the plan with key organizational objectives to highlight behaviors for success.
- Leverage modeling to identify and mitigate risk inherent in performance measures to avoid unforeseen consequences of a STIP.
- Balance administration with customization. While it is important to divide your employee population into logical segments to design relevant STIPs, creating multiple STIPs can be unwieldy to administer.
- Translate “compensation speak” into clear everyday language so that all participants comprehend the STIP. For a STIP to direct employee behavior in the manner intended, managers and employees need to understand it.
Impact and Result
- Use McLean & Company’s four-step process to design a customized STIP that focuses on the achievement of organizational objectives, while also incorporating line of sight for employees.
- Keep it simple – this will ease the administration, comprehension, and communication of the STIP.
- Monitoring, adjusting, and reviewing regularly are critical for the ongoing success of a STIP.
This guided implementation is a sixteen call advisory process.
Guided Implementation #1 - Align the STIP with key strategic priorities
Call #1 - Assess current state and discuss current STIP pain points.
Call #2 - Select key organizational objectives.
Guided Implementation #2 - Design the STIP
Call #1 - Discuss STIP structure and participation.
Call #2 - Review how to select organizational, business unit, and individual performance measures.
Call #3 - Brainstorm potential risks associated with each performance measure.
Call #4 - Discuss sources of data, data required, and triangulation.
Call #5 - Review how to select performance measure thresholds, targets, and maximums.
Call #6 - Examine performance measure weightings.
Call #7 - Discuss sources to determine the target payout percentage.
Call #8 - Review modifier and implications.
Guided Implementation #3 - Plan the STIP payout
Call #1 - Discuss key modeling practices and how to evaluate and mitigate the associated risks.
Call #2 - Prepare to share modeled scenarios with executives.
Call #3 - Develop a list of logistic action items.
Guided Implementation #4 - Communicate, monitor, and review
Call #1 - Customize the STIP Overview Template to your organization.
Call #2 - Discuss and plan for manager training and education.
Call #3 - Review STIP implementation and discuss areas for improvement.
Short-Term Incentive Plans
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- Title: Short-Term Incentive Plans
- Number of Course Modules: 5
- Estimated Completion Time: 1.5 hours
Describe at a high level how to design a short-term incentive plan and how to overcome/mitigate any challenges and risks.
By the end of this course, learners will be able to:
- Explain the challenges facing short-term incentive plans and the importance of aligning a plan with key strategic objectives.
- Recall the design elements of a short-term incentive plan.
- Discuss the various risks inherent in short-term incentive plans and how to mitigate them.
1 CPD hour per course.
Each course is valid for 1 PDC for the SHRM-CP℠ or SHRM-SCP℠.
The use of this seal confirms that this activity has met HR Certification Institute’s® (HRCI®) criteria for recertification credit pre-approval.