Cover image for Paying for performance : a guide to compensation management
Title:
Paying for performance : a guide to compensation management
Author:
Chingos, Peter T.
Edition:
Second edition.
Publication Information:
New York : Wiley, [2002]

©2002
Physical Description:
xxv, 389 pages : illustrations ; 24 cm
Language:
English
Added Author:
ISBN:
9780471176909
Format :
Book

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Summary

Summary

An up-to-date, revised edition of the complete, practical guide todesigning and implementing effective compensation plans

A compensation package should be more than just the means toattract and retain talented executives. The right kind of plan cangive your company a powerful strategic advantage. In Paying forPerformance, Second Edition, consultants at Mercer Human ResourceConsulting, Inc., one of the world's leading human resourcesconsulting firms, give you the tools and techniques you need todesign and implement a highly effective compensation program thatwill sharpen your company's competitive edge for years tocome.

The book also shows you how to understand shareholder expectations,government regulation, and a host of business and human resourcesissues. Paying for Performance, Second Edition:
* Describes best practices used at America's top-performingcompanies
* Offers proven pay-for-performance tools for addressing currentand future pay issues
* Uses case studies drawn from extensive Mercer Human ResourceConsulting, Inc. research
* Addresses the special issues affecting pay-for-performance innot-for-profits
* Presents expert advice on managing talent and competencies tomaximize performance
* Addresses the regulatory issues that affect executivecompensation
* Covers everything from base pay to annual and long-termcompensation


Author Notes

Peter T. Chingos is National Director for the Executive Compensation Consulting Practice of Mercer Human Resource Consulting, Inc.


Table of Contents

Peter T. ChingosSteven E. Gross and Haig R. NalbantianRose Marie Orens and Vicki J. ElliottLoree J. Griffith and Anna C. OrgeraDana Rahbar-DanielsJ. Stephen Heinen, PhD and Colleen O'Neill, PhDSteven Grossman and Craig UlrichMartin L. Katz and Karyn MeolaEdward W. FreherRichard HarrisMargaret M. EngelWilliam J. T. Strahan, JDJanet Den Uyl and Patricia KopaczJohn D. BloedornDonald T. Sagolla and Donna L. DiBlaseCarol Silverman, JDPeter J. OppermannSteven L. Cross and Donald T. SagollaSusan EichenHoward J. Golden, JD
Introduction: Paying for Performance--Best Practices in a Changing Environmentp. xix
1 Looking at Rewards Holisticallyp. 1
1.1 Why Is Reward Strategy Important?p. 2
1.2 What Constitutes a Reward Strategy?p. 2
1.3 How Corporate America Currently Looks at Rewardsp. 5
1.4 The Hospitality Company Finds Its Answersp. 7
1.5 How Corporate America Might Look at Rewardsp. 9
1.6 How to Develop an Effective Programp. 11
1.7 Case A: Implementing Reward Strategy to Stay Ahead in the Fast-Changing Technology Industryp. 13
1.8 Case B: Utilizing Reward Strategy to Integrate -- M&A Opportunitiesp. 15
1.9 Case C: Creating an Effective Global Reward Strategyp. 17
2 Variable Pay Programs: Pay for Resultsp. 20
2.1 A Process for Implementing Variable Payp. 20
2.2 Case Study: Gainsharing Planp. 30
2.3 Team Incentivesp. 36
2.4 Conclusionp. 42
3 Performance Management: Mapping Out the Processp. 43
3.1 Framework for Defining Key Elements of Performance Successp. 44
3.2 Performance Management as an Ongoing Processp. 48
3.3 Mechanics of a Business-Driven Objective Setting Processp. 49
3.4 Multisource Performance Feedback as an Assessment Toolp. 51
3.5 Maximizing Performance Through Feedback and Coachingp. 53
3.6 Performance Evaluation and Developmentp. 55
3.7 The Appraisal Interviewp. 57
3.8 Development Planningp. 58
3.9 The Performance Management Framework in Actionp. 60
3.10 Lessons Learned for Effective Performance Management Program Designp. 60
4 Competency-Based Reward Design Approachesp. 63
4.1 Design Purpose for Competency-Based Rewardsp. 64
4.2 Current Practices in Competency Linkagesp. 65
4.3 Base Pay Applications of Competency Linkagep. 69
4.4 Variable Pay/Incentive Applicationsp. 80
4.5 Recognition Award Applicationsp. 84
4.6 Conclusions on Competency-Reward Linkagesp. 85
5 Managing Talent to Maximize Performancep. 86
5.1 The Business Opportunity for Talent Managementp. 86
5.2 Aligning Talent Management and Business Strategyp. 87
5.3 Key Factors in Successful Talent Planning and Developmentp. 90
5.4 Conclusionp. 103
6 Getting the Most from Your Sales Compensation Planp. 104
6.1 Why Change a Sales Compensation Plan? Is It Worth the Risks?p. 105
6.2 What Tells You the Sales Compensation Plan Really Is Broken?p. 108
6.3 How Do You Know When Your Sales Compensation Plan Is Really Broken?p. 113
6.4 Design and Implementationp. 122
6.5 Administrationp. 126
6.6 Auditing and Modifyingp. 127
6.7 Some Final Thoughts on Designing a Sales Compensation Planp. 128
7 Pay for Performance in Not-for-Profit Organizationsp. 130
7.1 Introduction to Tax-Exempt Organizationsp. 131
7.2 Federal Tax Rulesp. 131
7.3 Intermediate Sanctionsp. 132
7.4 Determining Reasonablenessp. 138
7.5 Private Foundationsp. 139
7.6 Deferred Compensation in Tax Exemptsp. 139
7.7 Typical Executive Compensation Programsp. 140
7.8 Designing Effective Incentivesp. 141
7.9 Long-Term Incentive Plansp. 146
7.10 Developing a Pay-for-Performance Culturep. 148
7.11 Special Compensation Arrangementsp. 149
7.12 Conclusionp. 152
8 Designing the Annual Management Incentive Planp. 153
8.1 Role of Annual Incentives in Compensation Strategyp. 153
8.2 Influencing Management Behavior: Building a Line-of-Sight Relationshipp. 154
8.3 Corporate and Business Unit Performance Measurementp. 155
8.4 Determining Participation and Size of Award Opportunitiesp. 158
8.5 Building Performance Scalesp. 160
8.6 Assessing Individual Performancep. 164
8.7 Assessing Cost-Benefits of New Plans and Plan Modificationsp. 165
8.8 Other Considerationsp. 166
8.9 Final Checklistp. 167
9 Designing Incentive Compensation Programs to Support Value-Based Managementp. 169
9.1 What Is Value-Based Management?p. 169
9.2 VBM Performance Metrics Differ from Other Financial Measuresp. 170
9.3 VBM Implementationp. 171
9.4 Designing VBM-Based Compensation Plansp. 175
9.5 Establishing Performance Targetsp. 178
9.6 Conclusionp. 185
10 Long-Term Incentivesp. 187
10.1 Long-Term Incentives Definedp. 187
10.2 The Most Common Approachesp. 188
10.3 Objectives of Long-Term Incentive Plansp. 188
10.4 Long-Term Plans and Compensation Strategyp. 189
10.5 Stock Optionsp. 190
10.6 Stock Appreciation Rightsp. 195
10.7 Restricted Stockp. 195
10.8 Performance Plansp. 197
10.9 Private Company Long-Term Incentivesp. 199
10.10 Increased Participationp. 199
10.11 Larger Awardsp. 200
10.12 Investor Concernsp. 201
10.13 Responses to Market Volatilityp. 202
10.14 Successful Long-Term Incentive Plansp. 204
11 Broad-Based and Global Equity Plansp. 205
11.1 Prevalencep. 205
11.2 Tax, Accounting, Regulatory, and Legal Issues for Broad-Based Plansp. 207
11.3 Mechanics of Making Grantsp. 208
11.4 Calibration of Individual Awardsp. 208
11.5 Pros and Cons of Broad-Based Stock Compensation--Its Place within a Total Rewards Strategyp. 210
11.6 Global Stock Plans: U.S. Companiesp. 220
11.7 Effects in High- and Low-Paying Countriesp. 222
12 Executive Benefitsp. 223
12.1 Core Benefits and Perquisitesp. 223
12.2 Nonqualified Deferred Compensationp. 225
12.3 Executive Life Insurancep. 234
12.4 Executive Disability Benefitsp. 237
12.5 Medical Benefitsp. 238
12.6 Perquisitesp. 239
12.7 Conclusionp. 240
13 A Pay-for-Performance Modelp. 241
13.1 Guiding Principlesp. 241
13.2 A Compensation Modelp. 244
13.3 Base Salary Elementp. 246
13.4 Annual Incentive Elementsp. 247
13.5 Long-Term Incentive Elementsp. 253
13.6 Other Compensation Design Considerationsp. 261
13.7 Communicationsp. 262
13.8 Conclusionp. 263
14 Driving Organizational Change with Executive Compensation and Communicationp. 264
14.1 Types of Organizational Changep. 265
14.2 The Relationship Between Compensation Strategy and Organizational Changep. 266
14.3 Developing a Communication Strategy to Support and Drive Behaviorp. 269
14.4 Communicating and Implementing an Executive Compensation Strategyp. 271
14.5 Linkage of Compensation to the Organization's Culturep. 273
14.6 The Message or Purpose of Compensation Elementsp. 275
14.7 Linking Compensation Programs to Characteristics of Organization Change--A Readiness Assessmentp. 277
14.8 Conclusionp. 278
15 Transaction-Related Compensation Arrangementsp. 279
15.1 Overview of Transaction-Related Compensation Arrangementsp. 280
15.2 Change-in-Control and Severance Programsp. 281
15.3 Retention and Transaction Bonusesp. 288
15.4 Treatment of Cash and Equity Incentivesp. 292
15.5 Corporate Governance Issuesp. 295
15.6 Conclusionp. 296
16 Director Compensationp. 297
16.1 Trends in Director Compensationp. 297
16.2 NACD Guidelines and Changes in Section 16(b)p. 298
16.3 Elements of Director Compensationp. 299
16.4 Developing a Director Compensation Programp. 307
16.5 Summaryp. 312
17 The Role of the Compensation Committeep. 315
17.1 Business/Competitive Environmentp. 315
17.2 Shareholder and Regulatory Backdropp. 315
17.3 Performance Benchmarkingp. 322
17.4 Use of Third-Party Resourcesp. 325
17.5 Questions and Issues for the Compensation Committeep. 326
17.6 Summaryp. 328
18 Accounting for Stock-Based Compensationp. 329
18.1 Backgroundp. 329
18.2 Understanding the Basics of APB 25p. 332
18.3 Understanding the Basics of FAS 123p. 347
18.4 Impact of Stock-Based Awards on Earnings Per Sharep. 352
19 Selected Tax Aspects of Executive Compensation Plansp. 355
19.1 Taxation of Equity Devicesp. 355
19.2 Golden Parachutesp. 364
19.3 Section 162(m) Compliancep. 370
Indexp. 373