A New Framework for Executive Compensation | Harvard Business Review

Talent Management

One lever of effective talent management is the ability to incentivize and motivate employees to achieve an organization’s financial goals and business strategy. In the context of executives, this primarily happens through executive compensation. In this HBR article, the question is raised: Have conventional, performance-based, long-term equity plans that pay out against financial and 3-year strategic achievements gone out of date? The article’s position is that they have. The rationale is that in an era where radical strategic transformation and agility are required in order to address the fast pace of change (e.g. new competitors, advances in technology, etc.), conventional plans are too inflexible to allow for quick strategic pivots that are in the best interest of an organization’s long-term mission. As such, the author argues that these plans should be tied to the corporate mission, not a strategy–in order to enable these pivots to happen. The article elaborates on this position further and the ideas provide a good reference for HR, Talent Management, and Total Rewards leaders as they evolve their executive compensation philosophy and practices.

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