Thursday, October 04, 2007
Incentive or Entitlement?
Posted by: Mary de Reus
Our annual Compensation Surveys have just been released and they show that executives in the Toronto region continue to receive substantial wage increases of more than twice the rate of inflation. You can read the media release on our website HERE.
What I find most interesting about this year’s results is how the use of bonuses and incentives has become ingrained in executive compensation. Our survey of organizations across the Toronto region found that two-thirds (67%) of them offer their executives some type of bonus or incentive. The executives in those companies almost all get to collect that extra compensation, with 91% getting a bonus this year.
Does this mean that virtually all executives are meeting or exceeding their organizational goals? Or, are organizations setting relatively low standards so that executives can expect bonuses for something less than excellence?
I suspect that both explanations have some truth to them. The Toronto region is doing well economically (the GTA much more so than Toronto proper), so it stands to reason that many organizations and executives are hitting their targets. However, the use of bonuses has become so common that this extra payment may now be seen as more of an entitlement than an incentive.
If this, in fact, the case, employers are challenged to find additional ways of providing incentives to senior ranks. Necessity is the mother of invention and I have faith that the leadership of the future will create the tools required (I guess paying bonuses in U.S. dollars won’t do the trick anymore!).
The common use of bonuses is one of the trends we will be following each year, as we look at data from hundreds of organizations, associations, governments and other sources, covering more than 50,000 employees. Employers need to know how their competition is attracting and retaining the top talent needed for success, and that’s one of the key uses for our six-volume set of surveys.
Mary de Reus is a Vice-President of the Toronto Board of Trade and oversees the Board’s HR Surveys & Programs Department
Our annual Compensation Surveys have just been released and they show that executives in the Toronto region continue to receive substantial wage increases of more than twice the rate of inflation. You can read the media release on our website HERE.
What I find most interesting about this year’s results is how the use of bonuses and incentives has become ingrained in executive compensation. Our survey of organizations across the Toronto region found that two-thirds (67%) of them offer their executives some type of bonus or incentive. The executives in those companies almost all get to collect that extra compensation, with 91% getting a bonus this year.
Does this mean that virtually all executives are meeting or exceeding their organizational goals? Or, are organizations setting relatively low standards so that executives can expect bonuses for something less than excellence?
I suspect that both explanations have some truth to them. The Toronto region is doing well economically (the GTA much more so than Toronto proper), so it stands to reason that many organizations and executives are hitting their targets. However, the use of bonuses has become so common that this extra payment may now be seen as more of an entitlement than an incentive.
If this, in fact, the case, employers are challenged to find additional ways of providing incentives to senior ranks. Necessity is the mother of invention and I have faith that the leadership of the future will create the tools required (I guess paying bonuses in U.S. dollars won’t do the trick anymore!).
The common use of bonuses is one of the trends we will be following each year, as we look at data from hundreds of organizations, associations, governments and other sources, covering more than 50,000 employees. Employers need to know how their competition is attracting and retaining the top talent needed for success, and that’s one of the key uses for our six-volume set of surveys.
Mary de Reus is a Vice-President of the Toronto Board of Trade and oversees the Board’s HR Surveys & Programs Department
Labels: compensation, de Reus
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