In his fascinating book, Freakonomics, Steven Levitt remarked that “Incentives are the cornerstone of life” … yet so many companies don’t pay more than cursory attention to them, and invariably, only with respect to the most mundane, traditional sales compensation plans.
There’s probably nothing you can do to more powerfully drive the performance of your employees than to carefully consider your incentive plans. If you think yours are working beautifully and don’t need any attention, check in with Steven Levitt to see how easily they go astray.
Likewise, it appears that corporate America has not received the message either according to a recent compensation survey. It reports that despite the extraordinary publicity and government opposition to short-term compensation incentives, that while 70% of companies have made changes to their incentive plans, most of them major changes, very little has been done to either consider the incentives over a longer term horizon or to base the vesting of restricted stock on performance rather than longevity.