One effective analytical approach to planning executive compensation is to examine the results of executive compensation programs for the past five or ten years. The answers to these questions will provide valuable input as compensation planners set about the task of mapping out future compensation strategies. The following sections discuss the key strategic elements for designing executive compensation plans. These time frames may or may not match up very well with the time line for business objectives. For example, a company may plan to acquire a certain company in eight months or exit a certain business during the next 18 months.
Executive incentives can also have varying time lines.
The number of business objectives will depend on the number of lines of business in which the company is involved. Each business or business unit should focus on a limited number of objectives at any given time, perhaps 5 to 10. What matters is that the business objectives drive the incentive plan design, not the other way around. Measurements of success must take into account the business objectives. In the preceding acquisition example, key players could include the corporate treasurer, chief legal counsel, head of HR, head of business planning, and the head of the acquiring business unit.