Traditionally the underlying objective any of compensation structure has been to attract, motivate, and retain high performing staff. However, choosing the right compensation structure to achieve a specific goal can be difficult. Our business sustainability communications consulting believes that an essential component to any program is the link between incentives and desired behavior. Business sustainability has become a major investment criteria, and sustainability metrics are being applied to executive compensation.
“Investors expect corporate executives to be compensated based on their company’s financial performance. Increasingly, we are seeing the direct impacts that sustainability risks and opportunities can have on business—from the cost savings found through implementing energy efficiency strategies to the reputational risks of sourcing materials from irresponsible suppliers. Given the business case, investors are starting to ask companies to incentivize sustainability performance and build ESG criteria into compensation systems, a trend expected to expand in the future.” -CERES, Executive Compensation tied to ESG Performance
Drilling down into the details, performance pay structures involve setting base pay with incentives to obtain additional compensation for a demonstration of certain behavior. This concept is widely used in particular industries, based on the simple idea that pay can motivate job performance, increase employee effectiveness, and align business goals. This model offers several potential advantages:
- It aligns compensation to desired performance
- It rewards the right behaviors and builds unity
- It encourages self-management
- It encourages innovation
The critical drivers of performance, accountability, and commitment have traditionally been thought to be the measures of a sustainable workforce. However, top business sustainability cultures now realize there is a ‘required’ balance in individual talent management. By linking compensation to specific sustainability concepts, businesses have the potential to align the sustainability goals of the organization and motivate behavior.
At Taiga Company, we recognize a key to business sustainability is attracting, motivating, and retaining top talent. We realize that there is not a single incentive structure that is right for all businesses. Our professional consulting works with clients to define a structure that best fits the organizational needs. We simply ask clients: Is your current pay structure driving the desired performance?