Interesting article over at the Wall Street Journal outlining the cafeteria style compensation plan of Skyline Construction, which allows eligible employees to pick their own salaries, within a specified range. The catch: Choosing a lower salary means a shot at a larger bonus.
Roll the dice baby. Have confidence you can hit the numbers this year? Pick the lowest salary possible and receive a higher total compensation target - but, of course, a higher percentage of that total comp target is made up of at-risk bonus/incentive pay.
Feel lucky? More on the program from the WSJ:
"Mark Trento and Adam Chelini had a rare opportunity last year. They got to pick their own salaries, in a range between $125,000 and $150,000. The catch: Choosing a lower salary meant a shot at a larger bonus.
Mr. Trento, a vice president for San Francisco-based Skyline Construction Inc., chose the safety of $150,000. Mr. Chelini, a Skyline senior project manager, opted for $125,000, and wound up with a larger bonus than he would have received otherwise. While neither would say what their bonuses were, both say they were happy with their choices.
Executives at Skyline, which specializes in building and renovating commercial interiors, introduced the plan in 2005 when employees bought the company from its former owners. The idea proved popular. Twelve of the 15 eligible managers this year chose lower salaries and higher potential bonuses. "It's their way of throwing a little skin in the game," Mr. Hayes says."
Interesting concept. Couple of thoughts (although I'm not a comp professional - I'll ask Ann Bares to bounce in on this one) from my experience:
1. This type of program is best geared to executives, and you really can't take it to the masses. Only those who feel like they can impact revenue and expense will play the game - take it to the middle management levels and you'll hear crickets - they just won't take the risk based on their limited visibility regarding the probability of making the plan.
2. In certain cultures, unwillingness to take less salary might be equated with a lack of confidence - I'm your peer and I took less salary because we're going to make the plan! Wait a second - you opted for salary? Great, now I've got someone who's not "in it to win it".... You get the vibe...
3. I'll bank on my performance, but not John's - Another variant of #2. I took the higher salary because I don't think you can get it done. You can smell the teamwork from here, right?
In any event, it's a fascinating discussion. Apart from business and compensation theory, an individual's willingness to trade base pay for more incentive upside is an exercise in team - and individual - psychology.
Me? I'm doubling down, because I think ALL my teammates are players. To bad we don't have this type of plan, because I would be in. You guys/gals are out there reading, right?