Page 48 - Bruce Ellig - The Complete Guide to Executive Compensation (2007)

34 The Complete Guide to Executive Compensation

Importance
Element Egalitarian Distinctive

Salary Low Moderate
Employee benefits High Low

Short-term incentives Moderate High
Long-term incentives Moderate High

Perquisites Low High

Table 1-16. Cultural differences in pay elements

and development, with another that views them as expenses, frequently terminating their
services through periodic downsizings to improve the earnings statement. Similarly, there is
a distinct difference in the importance of the pay element in an egalitarian vs. a distinctive, or
class system, as highlighted in Table 1-16.
A performance-driven culture would be similar to a distinctive one except that perquisites
would be dropped to a low importance. Hence, rewards are differentiated in a meaningful
manner because a good assessment system with meaningful metrics is tied to demanding
standards, not to organization level.
Culture can also be defined in terms of rewarding risk vs. compliance, creativity vs. con-
formity, and values vs. results. Therefore, it is critical to define the current culture and deter-
mine whether to maintain or change it. Namely, is it consistent with the vision and mission?
A highly regulated culture that penalizes failure would have a difficult time succeeding if
product innovation were key to success. If changed, the direction and degree of change
must be clearly articulated. How does the organization differentiate itself from its competi-
tors? How is work organized? How is the organization structured? How are employees treat-
ed? How are resources allocated? What gets communicated and how? Are these consistent
across organizational units? What is the line of sight between individual and group objectives
and goals?
Is it surprising that a pay plan that may be very successful in one organization would
be a failure in another? Of course not, if they had different cultures. Company culture is
a major factor in designing pay delivery systems since it reinforces desired behavior and
outcomes.
Another way of looking at how these various components come together is shown in
Figure 1-10. Degree of success is shown on the Y axis and time on the X axis Starting with
where a company is now, compare it to its vision of the future. The difference is addressed by
the mission, or how to achieve the vision. Having assessed the threats, and opportunities along
the way, the company has developed a major business strategy with supporting objectives and
goals. The next step is to operationalize the process.
Issues
An assessment of the threats and opportunities vs. achieving the stated goals and objectives
will identify issues that need to be addressed. For example, a bear market will jeopardize plans