Larry Comp Illuminates Pay-For-Performance Compensation Plans for Entrepreneurs

In the latest installment of the Business Growth Workshop series at the University Club in Pasadena, executive consultant Larry Comp illuminated the history and effectiveness of pay-for-performance (P4P) compensation plans. Speaking to a group of local entrepreneurs, Larry Comp asked the powerful and engaging question, “If employers are your company’s largest and most important investment, are you getting the biggest bang for your buck?” What proved surprising is how many modern employers are relying on old-fashioned bonus methods that fail to inspire employees, thus failing as well to boost productivity and profitability.

As the current President of the University Club’s Board of Governors, James Harwood of Total HR Management presented Larry Comp to the morning workshop. Larry Comp started out with laughter as he compared the history of bonus plans in businesses to the struggles of Clark Griswold in National Lampoon’s Christmas Vacation. As played by Chevy Chase, the character suffers throughout the entire film as he worries whether or not he’s going to receive his annual Christmas bonus and how big it will be. If he doesn’t get the amount he expects, he will be unable to pay for Christmas. As Larry Comp described, such an uncertain bonus structure had become a dangerous and common reality in the majority of American businesses.

Although long-term planning is essential, Larry Comp described how a company’s most potent vehicle for driving desired employee performance is an organization’s short-term incentive plan. Many modern day entrepreneurs do not realize the importance of bonus structure in relation to employee performance. By outlining the evolution of pay-for-performance in the United States, Larry Comp showed how slow and hazy the process actually was in practice. It took many fits and starts before executives recognized the value of transparency, employee engagement, and business training to achieve specific goals.

The most contemporary challenge has been companies coming to terms with the realization that top-down goal setting where the executive sets goals for his employees fails to achieve desired results and fosters resentment. In contrast, bottom-up goal setting by well-trained employees leads to greater productivity and much higher levels of employee satisfaction and achievement. By allowing employees input, you harvest a sense of hands-on investment in the overall business through the bonus structure.

For open book management to work, Larry Comp explained how executives need a balance between smart design of bonus plans with effective execution. In other words, the practice needs to match the theory. By fostering employee investment in the company, bottom-up pay-for-performance incentive plans lead directly to the empowerment of employees. The vast majority of employees want to make a difference, but they are not provided with the encouragement needed to take those steps. By opening the doors with open book management and P4P incentive plans, you outline a path for your employees to walk with confidence.

A key point Larry Comp made to the gathered entrepreneurs at the Business Growth workshop was that incentive plans should engage and motivate employees from the start. The simple truth is not having an incentive program has proven to be far more costly than having one in the vast majority of cases. With focus and illumination, Larry Comp provided real value in his P4P excavation at the Business Growth Workshop at the University Club in Pasadena.

About the Author

Growing up in New York City as a stutterer, John Lavitt embraced writing as a way to express himself when the words would not come. After graduating from Brown University, he lived on the Greek island of Patmos, studying with his mentor the late American poet Robert Lax. As a writer, John Lavitt’s published work includes several articles in Chicken Soup For The Soul volumes and poems in multiple poetry journals and compilations. Today, John Lavitt works at Open Interactive as the Director of Content Development. As a journalist, he is a Regular Contributor to The Fix where he writes investigative reports about the latest issues in the world of addiction and recovery.