Compensation as a Strategic Asset

CHAPTER 10SETTING GOALS AND MANAGING PERFORMANCE

“The reason most people never reach their goals is that they don’t define them, or ever seriously consider them as believable or achievable. Winners can tell you where they are going, what they plan to do along the way, and who will be sharing the adventure with them.”

—Denis Waitley

When owners or employees express concern with their compensation systems, many people argue it is a result of a flawed compensation system. We argue that in addition to the possibility of a faulty system, one of two things is likely happening: either individuals do not understand the compensation system, or firm leaders do not manage performance. Employees need a goal-setting process that creates a “line of sight”—they need to be able to draw a line of sight between the firm’s vision and strategic objectives and what they do on a daily basis, and they need to understand how what they do on a daily basis translates to compensation. They also need frequent, accurate, and specific feedback to let them know how they are performing. Firms often have these systems—but all too often these are the systems that are flawed, either in their design or their execution.

This chapter covers the basics of goal setting and a process you can use to set and monitor progress toward goal achievement. We realize there is more than one way to set and monitor goals. The process itself is not as important as the consistency with which it is followed—for both goal setting and ...