Furthermore, companies traditionally handle
multiple objectives in a compensation formula
by assigning weights to each objective
and calculating incentive compensation by the
extent to which each weighted objective was
achieved. This practice permits substantial incentive
compensation to be paid if the business
unit overachieves on a few objectives
even if it falls far short on others. A better approach
would be to establish minimum threshold
levels for a critical subset of the strategic
measures. Individuals would earn no incentive
compensation if performance in a given period
fell short of any threshold. This requirement
should motivate people to achieve a more balanced
performance across short- and longterm
objectives.