End Entitlements

Promote an ownership mentality

Most company leaders don't consciously set out to create a sense of entitlement with employees. However, if compensation isn't developed properly, expectations are raised that can't (or shouldn't) be sustained.

To avoid entitlements, company leaders must be very clear about the outcomes they are willing to reward. Value should only be shared when value has been created.

A written compensation philosophy statement that clearly articulates what leadership will "pay for" is the starting point to ending an entitlement mentality. From there, the principles of "stewardship" and "value sharing" need to be reinforced at all levels, especially in the way pay strategies are engineered and communicated.

In private companies, this is most often accomplished through solutions such as performance unit plans, profit pools and phantom stock agreements. Public companies more commonly employ restricted stock, options or their variations to create the alignment they seek. Performance-based deferred compensation is another common tool both public and private companies use to drive results and inspire long-term value creation.

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