Deena Gilbert is the Managing Director/Principal Consultant and Owner/President of Gilbert & Associates. Her background includes 20 plus years holding senior management and consulting roles to assist and drive organizational success in areas of total rewards. From retirement, succession, compensation, benefits and performance planning she has guided organizations and trained executives. She has built business plans for clients, participated and facilitated strategic planning to expand organizational presence and worked to serve both profit and nonprofit industries, including higher education. She has a global background, having lived overseas and supported global organizations in setting up programs ranging from hiring programs to exiting. She has trained and developed international colleagues and management in successful management of policies, labor law compliance, competitive practices, and employee commuications. She has also presented programs to Boards for approval.
Her clients have ranged from small service providers with 70 to 1,000 employees to larger Fortune 100 global companies. Clients are from a diversity of industries and include family-owned and foreign-owned organizations.
She has an Economics Degree from the University of Connecticut and a Masters in Management from Southern Oregon University. She has also acquired a SPHR, CCP and Mediation Certification. In addition to this she has taken post-graduate work in Economics, Computer Science, Cultural Anthropology and Applied Psychology.
Deena has also given presentations to various SHRM chapters, CBIA on total rewards topics and has been published for an article on FMLA. She has also taught at two universities, developing the curriculum and course work.
Organization ABC is looking to expand it's book of business while keeping it's expenses down. Merit pay is not sufficiently high enough to motivate, recognize and reward those who will need to stretch their efforts to expand the book of business dramatically. What should they do?
Organization ABC decides the best course of action is to align it's goals and objectives with the financials necessary to sustain their operations while reducing costs relative to revenues. The desire to increase the rate of return means cost cutting or revenue generation. Focusing on the positive, that is revenue generation, the organiation ABC chooses to apply an incentive plan to a broader employee population while setting 'stretch goals' for that population that go beyond what is expected from these employees merit performance reviews. This 'stretch' is set up so that the employees must reach some financial and nonfinancial targets that can be readily measured and includes the administrative costs of the incentive plan.
Targets are high as is the incentive payout if met. Hence setting a minimum level that includes the administrative charges for the incentive plan which is 10% to 15% above the level expected based on the annual business plan was established as the starting point/'minimum'. Building from this to add another 5% to the figures at the minimum level becomes the 'target' and from there another 5% becomes the 'maximum' payout.
Tied to these performance levels may be an incentive starting at 10% (the minimum) with an additional 5% to 15% (target) and an additional 5% to (20% maximum). This is considered a pretty comfortable and competitive range based on base pay levels.
Illustrating this further, an employee on such a plan who achieves minimum level of performance at $75,000 base pay level may earn $7,500 (10% of base pay) incentive for that years performance. While another employee may have exceeded their target and earned a 20% maximum percentage level derived from their incentive with the same base pay level or $15,000. Significant level of incentive for someone at $75,000 as long as the market for total cash compensation is comparable.
As the organization ABC considered these factors, the results of higher performance are now tied not only to a merit based program but also to a carrot set up for those who are truely high achievers and whom will reach these newly formed 'stretch' objectives to achieve not only success for themselves but also success as a direct line to the organizational annual goals and objectives.
This was a successful approach towards paying for performance using more than 1 tool. The Merit budget provided a merit performance level that met the approved budgets and objectives, but the incentive set higher goals then the approved budget and objectives and would only pay if these were achieved as the achievement was the value-added, was the pool of money that allowed for these incentives to be paid.
Note: Deena Gilbert has designed, audited and administered sales, management and team incentive plans since 1985