Page 659 - Bruce Ellig - The Complete Guide to Executive Compensation (2007)

644 The Complete Guide to Executive Compensation

1. Treating everyone the same is inconsistent with treating each individual equitably.
2. Individuals believe that others in similar positions work less and are paid more.
3. Appearance is at least as important as reality (e.g., pronouncements are often accepted
as performance).
4. Performance ratings will always support the recommended pay action.
5. The highest performance ratings will go to the immediate subordinates of the manager.
6. Complete flexibility usually results in less rather than greater use of discretion.
7. An action correcting an inequity results in creating a new inequity.
8. Formal procedures and programs apply to those one level below the executive making the
pronouncement.
9. A decision is difficult to modify even though the parameters have changed, because the action is
not examined in terms of the changing situation.
10. An arithmetic increase in the number of people involved results in a geometric increase in the
time required to reach agreement.
11. Time is our most valuable resource; once spent, it can never be regained. How it is spent is a
significant factor in our happiness and effectiveness.
12. Outcome is the sum of small details.
13. It is easier to be successful than to continue being successful.
14. One’s level of success is the sum of one’s own performance and the performance of those
being managed.
15. It is easier to pull individuals to a desired outcome than to push them.

Table 11-2. Ellig’s laws

1. Measuring too few factors is as bad as measuring too many.The first means not all major goals
are addressed; the second is difficult not only to communicate but also to remember.
2. Measuring only the easy-to-measure factors probably means overlooking more important but
difficult-to-measure factors.
3. Measuring only outcomes and not behavior may result in optimizing results but in a way
inconsistent with desired culture.
4. When measuring behavior, it must be consistent with the desired culture.This is critical in
organizations undergoing transformation.
5. A balance must be struck between individual and group incentives.Too much on individual will
undermine teamwork.The reverse may make it difficult for the individual to believe his or her
output will have any real impact.
6. If performance measurements are not championed by top management they are likely to be
ineffective.
7. The payout should be consistent with the degree of difficulty; otherwise, individuals will be either
over- or undercompensated for performance.
8. Short-term incentives in the absence of long-term incentives will lead to short-term thinking.
9. Incentives not understood clearly do little if anything to motivate desired behavior/outcomes.
10. Incentive plans that are not continually reviewed to ensure a link with corporate and divisional
objectives/goals will over time be totally ineffective.

Table 11-3. Design cautions