First, the executive incentive model
Executives are managers and decision-makers of company resources, and the fate of the company is closely related to its behavior. However, executives as professional managers (including some executives as minority shareholders) are essentially natural persons with economic rationality. Therefore, the decision-making behavior of executives will inevitably be influenced by their own interests, and their ultimate goal is not to maximize enterprise value, but to maximize personal interests under certain constraints. Therefore, how to design an incentive model for executives to couple their personal goals with those of enterprises (or investors), so as to achieve a win-win situation between enterprises and individuals is the key to executives' incentive. Reasonable incentive and distribution model will directly affect the decision-making of executives, and then affect the fate of the company.
Compared with employees, corporate executives have made remarkable achievements in economy and performance, and their needs are more comprehensive and diverse than those of ordinary employees, so the focus of incentives needs to be adjusted accordingly. To sum up, the incentives for executives can be divided into the following aspects:
According to the research, the incentive model for senior executives is usually a comprehensive incentive model including the above incentives: 1), short-term cash incentives, 2), long-term incentives supplemented by deferred payment, 3), non-cash incentives as restrictions, and 4), while giving spiritual respect and incentives.
Generally speaking, the incentive for executives should increase the correlation with performance and pay attention to risky rewards. At the same time, we should pay attention to the degree and way of combining the incentive model of executives with their strategy and industry characteristics. For example, the retail industry is a typical short-cycle industry, and its core competitiveness generally comes from the growth rate, the rationality of inventory and the rationality of pricing, so the assessment of retail executives should mainly be carried out from these aspects. Retail executives should pay more attention to annual incentives rather than long-term incentives. In the long-term incentive tool portfolio of retail executives, they prefer to use performance-based futures and options, and there are almost no cash and welfare incentives based only on service period.
In addition, the incentive mode of self-selected salary scheme may be the development direction of executive incentive in the future. From the practical application, it can be found that more and more companies tend to design a menu-based salary scheme with rich content, which can cover fashionable salary items, thus increasing the flexibility of choice and encouraging senior managers. These compensation schemes are usually very detailed in intangible compensation, including personnel training, promotion and development, listening to needs, clarifying responsibilities and welfare benefits.
Second, the method of executive incentives
Without considering the non-material spiritual incentives, the common salary structure of senior management usually includes:
1, basic annual salary: used to ensure the basic living standard of executives, and generally paid on a fixed monthly basis.
2. Annual salary assessment: used for short-term incentives, generally combined with the company's performance in the current year.
3. Long-term incentives: used for long-term incentives, generally including stock options, futures shares, deferred bonuses, etc.
4. Welfare: Non-monetized salary items to enhance the ability to retain senior executives.
1, basic annual salary
The basic annual salary and monthly fixed allowance constitute the fixed income of executives.
2, the annual salary and bonus assessment
The annual salary of executives is generally paid annually, so the annual salary and year-end regular bonus constitute the main part of the floating income of executives. In addition, executives will also have some special bonuses.
(1) Annual salary assessment
Annual salary will generally be paid at the end of the year according to performance appraisal. The assessment of annual salary will generally be linked with company KPI and individual KPI, and there are four ways to link:
1), completely linked to the company KPI: that is, the annual salary is completely determined according to the company KPI assessment results, which is suitable for small enterprises or enterprises in the development stage; Because the high-level division of labor is not very strict and clear, it is more appropriate to use team performance to determine bonuses; In addition, in some state-owned enterprises, it is possible to adopt this method because they are often unwilling to widen the gap too much;
2) The company's KPI accounts for a large proportion, while the individual KPI accounts for a small proportion: it is suitable for enterprises whose single department has little influence on the company's performance, or enterprises that advocate equal distribution and teamwork in culture, or enterprises that should advocate cooperation;
3) The company's KPI accounts for a relatively small proportion, while the individual KPI accounts for a relatively large proportion: it is suitable for enterprises that can obviously measure departmental performance and admire individual heroism culture;
4) Fully linked with personal KPI: it is suitable for enterprises with good corporate goal decomposition, that is, enterprises whose personal KPI can effectively and comprehensively support corporate KPI.
The specific selection and proportion of hook-up methods should be determined according to the company culture and management characteristics.
(2) year-end regular bonus
Different from the annual salary, the year-end regular bonus usually has no base and is not linked to a very comprehensive assessment indicator, but is replaced by a key indicator of 1-2. Commonly used such as: net profit, net profit or income growth rate, return on net assets, return on investment (to determine the investment base and return bottom line) and so on.
There are two ways to withdraw bonuses: one is linear and the other is progressive.
Linear method is to take proportional extraction according to the completion of key indicators;
Progressive method usually sets the extraction ratio in stages according to the actual completion of performance, such as θ 1 between the bottom line goal and the regular goal, θ2 between the regular goal and the pursuit goal, and θ3 above the pursuit goal. At the same time, there are two ways to deal with bonus withdrawal, one is with upper limit and the other is without upper limit.
Generally speaking, the general manager decides the distribution of other members of the management team, and the chairman or boss decides the total amount and the general manager's bonus. There are also two common distribution methods: one is to determine the distribution ratio of each high-level, such as vice president of marketing accounting for 30% and vice president of finance accounting for 20%. The first is to determine the extraction coefficient under various performance levels. For example, if the performance is excellent, the extraction coefficient is 1.2; if the performance is good, the extraction coefficient is 1.0. Then, according to the personal coefficient/total coefficient, it is used as the distribution ratio of executives. Of course, the two methods can also be combined, that is, using the distribution ratio and considering the extraction coefficient.
(3) Special bonus
Special bonus refers to a separate bonus for a job or a member in addition to the regular bonus, which is generally agreed in advance according to the specific situation.
Common ones are: 1), bonuses for overfulfilling tasks; 2) bonus for completing major projects or obtaining major business; 3) Outstanding contribution bonus
3. Long-term incentives
Long-term incentives are short-term incentives such as basic annual salary, assessment annual salary and bonus, which are generally used to motivate executives not only to pay attention to current performance, but also to pay more attention to the long-term development of the company, and also to retain executives for a long time. Long-term incentives are generally as follows:
(1) regular bonus
Regular bonus is a long-term bonus setting, which is generally paid after a certain number of years. It is suitable for enterprises with stable performance and clear main business, but not for small and medium-sized private enterprises with rapid changes. The purpose of setting term bonus is to assess the performance of operators in a longer period of time, and at the same time encourage senior managers to develop together with enterprises. Generally speaking, there are the following methods: 1) Withdrawal in the current year and payment at the expiration of the term: The withdrawal method in the current year is similar to regular bonus, which will be assessed and paid according to the average performance level during the term; 2) Withdrawal in the current year and rolling payment: that is, after withdrawal in the current year, it will take several years to complete the payment, and the payment method will be agreed upon when leaving the company; 3) One-time accrual and one-time payment at the end of the term: based on the performance during the term, one-time accrual and payment will be made after the term expires; 4) One-time provision for deferred payment after the expiration of the term: one-time provision after the expiration of the term, but the payment needs to be postponed for several years, which is used to limit the short-term policy of the operator within the term.
(2) Bonuses are linked to seniority (similar to seniority pay _)
Refers to the extra bonus paid because of the length of service, which is used to retain key personnel. Generally, this bonus belongs to golden handcuffs, so if you leave your job early, it will reduce your bonus income. Common forms are: 1), one-time bonus after accumulated service: this bonus is usually not too high, similar to delayed service salary. If you leave your job halfway, you won't enjoy the bonus; Every year, the company subsidizes a part of the bonus that can only be obtained after the expiration of service: every year, a part is accrued from personal income, and the company subsidizes a part in proportion. Generally speaking, the proportion of company subsidies is relatively large, and individuals can at least reach1:1; In actual implementation, the proportion and amount of annual company subsidies can also be determined according to individual performance; If you leave your job halfway, you can return the personal part, but the part subsidized by the company is often not available; The specific form can be the form of enterprise annuity.
(3) Futures and options
Refers to the right to purchase company equity under certain conditions. This method is more suitable for listed companies, because the rise of stock price can bring a premium and provide extra income for those with motives. For non-listed companies, years of service and personal performance are often used as prerequisites for buying shares in the company. For example, employees who have served for more than 5 years can buy company shares. Because the operation methods of futures and options are relatively mature, there are many related discussions and cases, which are not suitable for non-listed companies, so the author will not repeat them here.
(4) Dividend rights or profits
Share-sharing plan is a kind of dry stock that allows executives without equity to share the company's income, which is suitable for non-listed companies or shareholders who are unwilling to sell their equity. This way, executives can share the benefits of the company's development and encourage them to pay attention to the company's interests. At the same time, it does not need to dilute the company's equity or invest a lot of cash, so it is widely used in various non-listed companies.
There are generally two restrictions on the design of dividend rights or profit sharing plans. First, after the company's performance reaches the standard, determine an overall accrual ratio, such as15% of the company's profits shared by the senior management team; Secondly, limit the performance level of executives, for example, we can learn from the way of granting futures or options, plus many restrictions on exercise.