Designing rewards to drive transformation
Segmented incentive plan to support a diversified high-tech company
A portfolio company had grown mainly through acquisitions. Business maturity cycles varied from high-tech start-ups to declining businesses. The company aimed to execute a turnaround strategy and looked ways to communicate its executives the desired behaviors. The organization also had retention issues among its key people. Building a consistent framework for differentiating rewards according to business performance was therefore a top-priority.
At first performance and reward principles were defined to guide incentive plan design. In the process different compensation mixes were identified business by business. Through a series of discussions with the board members and group management, OnWork advised the company to segment its incentive design. We started with the transformation incentive model. It was designed to recognize and reward high performing individuals. Given the high level of ambiguity in the business, board retained substantial discretion over the payouts. The growth-driven incentive model was created to drive performance in start-up businesses. In both cases short- and long-term incentive models were integrated. Overall the approach provided flexibility to tailor performance measures and priorities to specific business needs.
The tailored transformation and growth incentive models offered a strong line-of-sight and emphasized performance-driven leadership. Board members and CEO could more effectively drive intrinsic value generation and engage key business leaders. The incentive plan was a key piece of a broader transformation journey. And it resulted in clear impact on executive behavior.