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Companies that historically have reserved incentive compensation for the select few are extending their plans to encompass more levels of management and even nonmanagement positions. As plans proliferate, they often mutate so that no two are exactly alike. Plan administrators accustomed to handling 20 or 30 participants with a word processor or simple spreadsheet find themselves overwhelmed with just the eligibility determination, not to mention everything else that must be done once that is finished.
At some point, you recognize the need to work smarter, not harder. It is hoped that that point is well in advance of scheduled deliverables, allowing you time to involve your computer services (information technology, or IT) group.
What can the IT group do for you? Well, that depends on your budget and their resources, to name just two of the variables to be considered. This article presents a case study of a project at Monsanto that was chartered to automate the administration of incentive compensation, from start to finish. Monsanto is a chemical company with Crop Protection, Produce, Fibers, Saflex, and Nutrasweet counted among the major business units. The project took a full year to complete and successfully automate the administration of nine cash and stock plans covering more than 3,000 participants. This article describes the design process and the challenges that were addressed along the way.
SPRING 1993 - DEVELOPING A COMMON LANGUAGE
The first step was to have a meeting of "business experts" and IT people to discuss the business area and terminology. It is vital to establish a foundation for discussion so that everyone is talking the same language.
The purpose of incentive compensation was outlined as follows:
* Focus participant attention and efforts on company performance.
* Recognize and reward employee contributions to business results.
* Stress that personal, group, and company successes are interrelated.
* Emphasize long-term, contiguous success.
The plan administration process was summarized as encompassing five functions:
* Eligibility - determining the participants
* Funding - estimating the cost of the plan
* Allocation - calculating objective awards
* Recommendation - assigning actual awards
* Distribution - communicating awards
All plans used the first and last function, but they varied as to their use of the middle three. For example, plans that had a predetermined fixed cost skipped funding, whereas plans that did not allow management modification of calculated awards bypassed the recommendation element.
Expansion Necessitated Improvement
In recent years, Monsanto incentive plans were extended beyond executives to lower levels of management and even into nonmanagement positions. Although success factors were very different (e.g., safety instead of sales, production instead of profit) the purposes of the plans at these levels remained the same. The additional complexity and resource demands brought on by the new plans had already forced some administrators to employ computer spreadsheet programs and, in one instance, a rudimentary computer …