Abstract
Better, more accurate performance measures and well-designed incentives are important tools for compensation professionals to contribute to the success of their companies. Seeking ways to make their incentive plans ever more effective, savvy compensation professionals today are considering financial performance measures like Economic Value (EV). An EV incentive can be a powerful tool or just fancy pay-it all depends on how the plan is designed. What works and what doesn't in EV incentive design? The author says that every plan must begin with three basic steps: define the plan's purpose and objectives; determine whether EV is right for your company; and develop the scope and mechanics of the plan. Economic Value measures more and can tell management more than other performance measures, says the author. If used in the right situations, it is a valuable financial measurement tool that has tremendous potential power to drive performance throughout the organization while improving workers' understanding of the business they work for.
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