Most compensation programs fail for one of two reasons: the design doesn’t match the strategy or the company fails to use the program to communicate and clarify priorities. Boards and compensation committees focus a lot on the first problem—metrics, targets, peer groups, mix—but rarely as much on the second.
In parts one and two of this series, we explored how the Employee Value Proposition (EVP) is built on more than compensation—it’s the full employee experience, from culture to flexibility to meaning. But pay is never neutral. Money signals what an organization values, how it wins and which risks it will reward. This article makes the case that a well-designed compensation program can still miss the mark if no one’s told a clear story about what it’s supposed to accomplish.
This article provides a framework for boards and compensation committees to understand the link between pay program design and communication strategy—and how to leverage that connection to strengthen both the effectiveness of compensation and the broader EVP. The key is deciding how prominent compensation should be in the company’s culture and narrative, then ensuring leadership has the tools to communicate that choice. When done well, this ensures that compensation programs serve their intended purpose and drive employee and executive motivation and focus.
The Core Question: How Prominent Should Compensation Be as a Tool to Drive Focus?
Should compensation be a quiet validation of outcomes or a loud rallying cry for change? The two sides of this spectrum are not mutually exclusive, and programs will sometimes blend approaches from each end of the spectrum to capture various areas of performance, However, placing compensation elements on either “pole” can help boards consider how best to communicate the rationale to employees and executives.
| Dimension | More Quiet / Retrospective | More Prominent / Prospective |
| Primary purpose | Validate outcomes, Reward consistency | Galvanize toward a mission; drive change |
| Cultural Signals | Stability, Continuity, Professionalism | Urgency, Ambition, Ownership |
| Timing | Tied to results that are likely to be achieved based on the current environment | Tied to stretch goals or future milestones |
| Behavioral effect | Encourage reliable execution | Encourage transformation and risk-taking |
| Works best when | Business is steady, Talent markets are predictable | Strategy inflections (turnaround, scaling, new model) |
| Risks if misused | Complacency, Incentive pay feels like an entitlement | Stretch goals perceived as unachievable, Poorly calibrated goals may hinder flexibility, Over-engineered communication may cause employee fatigue |
| Communication style | Understated, Periodic confirmations, Manager-led | Loud and frequent, Senior Leadership-led with story, symbols, rituals |
Communication, not just design, determines where you sit on this spectrum. The key is deciding how prominent you want compensation to be in your story, then intentionally matching your communication to drive focus on what matters most.
What Happens When Design and Communication Misalign
When compensation design and communication strategy don’t align, even well-structured programs fail to motivate. Consider these common scenarios:
- A tech company launches ‘stretch’ goals tied to 300 percent+ payouts, but leadership rarely mentions them, and managers don’t know how to translate them into day-to-day actions. As a result, the goals feel arbitrary and demotivating rather than energizing.
- A retail chain emphasizes “increasing the percentage of online sales” for its executives, but the targets are set at 90 percent achievement rates. Since the percentage is easily achieved, these bonuses become an entitlement, not an incentive.
- A private equity-backed turnaround grants massive equity upside to stake the team in the company’s future, but never explains the milestones, and talent doesn’t understand what they’re working towards.
These failures share a common root: The spectrum isn’t determined by which metrics you select, but by how you communicate them. The same metric can work brilliantly in opposing philosophies—what changes is how leadership frames it. Operating margin can be a rallying cry (celebrated monthly in dashboards) or a background signal (quietly embedded in annual LTI recaps). Relative TSR can drive competitive urgency: “We are focused on beating the competition,” or simply validate results against peers.
The missed opportunities add up. This is where the compensation committee can have a role. Rather than leaving communication strategy to chance, they can explicitly ask: Where on this spectrum do we want to sit? And do our leaders have the tools and mandate to make the most of the intended approach? When boards treat communication strategy as an afterthought rather than a co-equity to design, they risk rendering compensation as an ineffective tool. What could be a critical piece of the strategy toolkit can leave teams demotivated, confused, or uninspired if not communicated thoughtfully.
Three Compensation Designs—and How to Communicate Each
The designs below are broad starting points to work with and can help you choose one as your anchor, then adapt elements from the others as needed. The following is not just a management exercise—boards can explicitly ask teams: “What communication philosophy have we chosen, and do our leaders have the tools to execute it?”
Quiet Programs (Background Incentives)
Quieter compensation programs reinforce strategy without dominating day-to-day dialogue—compensation validates outcomes, but it isn’t the sharpest motivational tool in the arsenal. These are best for steady businesses with solid execution, as plans typically pay out within a narrow range (90-110 percent of target), reflecting low leverage and stable economics. There is a risk, however, of complacency when targets feel like entitlements.
- Communication Approach Managers lead with brief and generalized quarterly updates with an annual recap; leadership appears sparingly (CEO/CFO letter, year-end town hall). Employees receive 1–2 charts each quarter; manager 1:1s translate corporate metrics into individual contributions. Materials are minimal—plan-at-a-glance, progress card, FAQs. No fanfare, just consistent low-frequency reinforcement.
- Sample Message: “Our compensation affirms consistent performance and responsible growth. We focus on meeting commitments and safeguarding long-term value. Each quarter, you’ll see a brief progress card; at year-end, we confirm outcomes and recognize teams that delivered with discipline. Thank you for doing the work, the right way, every day.”
Bold Equity Plans (Transformation Fuel)
Bolder programs are often designed to fuel transformations, with significant upside tied to long-term value creation. They are high risk, high reward: executives share meaningfully in wins, but they face real downside if the transformation doesn’t succeed. These are best for turnarounds, pivots or the introduction of new growth engines—moments when you need leadership to take bold risks and think like owners. As such, they are not typically suitable for broad-based populations where consistent pay delivery is more critical.
- Communication Approach: The CEO owns the narrative at launch and milestone updates. The cadence is built around moments, not daily metrics—after an initial town hall and published milestone roadmap, quarterly check-ins track progress without overload. The message should become part of how participants think, worked into their psyche, tied to vision, not tactics. Total Rewards maintains a simple “what unlocks what” one-pager that gets repeated, not reinvented.
- Sample message: “We’re investing in the next chapter, and we will share it together. Your equity will vest as we create long-term value—product launches, revenue milestones and profitability gates. This is a long game: take risks, move the needle, do things that unlock value. We’ll mark each milestone together and make the path—and the upside—clear.”
There are also versions in between these two—scorecard driven plans that are precise but heavily referenced in day-to-day operations are an example of an ‘in between’ design.
How to Know What’s Needed… and When
The best programs evolve with the business. Wise boards and leadership teams choose based on where they are and where they are headed in terms of strategy.
Go prominent when strategy is changing—turnarounds, new business models, M&A integration—or when performance has plateaued and you need a behavioral shift. Prominent programs also work when employee surveys show confusion about priorities, when the market is forcing existential choices, or when you need the entire organization rowing in the same direction on 1-2 critical outcomes.
Go quiet after you’ve hit strategic milestones and need to steady the ship, or when employees report ‘compensation fatigue’ from constant plan changes. Choose this approach when operational execution is solid, strategy is stable and over-communication risks making pay feel engineered or manipulative. Quieter programs also make sense for large, stable workforces in low-growth environments—when the needle doesn’t move much, focusing attention on pay may not be the best use of organizational energy or management bandwidth.
Context matters. With larger workforces, high variability becomes exponentially harder to manage and explain fairly. What energizes a 50-person startup can overwhelm a 5,000-person operation.
Bringing It Together
Before your next compensation committee meeting, ask one question: Are we designing incentives to be heard, or hoping they’ll speak for themselves? Boards that treat this as a strategic oversight question—not just an implementation detail—are far more likely to see compensation actually drive the behavior and focus they intended.
At its core, compensation is a communication tool that shapes focus and drives behavior. Done well, it can be a clear signal that aligns strategy, values, and behavior and a powerful pillar of your employee value proposition. Done poorly, it can create noise, confusion, and missed opportunities.
Here’s the real test: If you asked ten employees to explain what success looks like this year and how pay reinforces it, would you get ten similar answers? If not, the problem isn’t your metrics—it’s your story.
