Variable Compensation

Abstract

Organizations with fixed cost workforces are handicapped when trying to operate in a variable revenue world. Downsizing has become common as a cost reduction strategy but has generally failed to produce the desired results. When all direct compensation is all in the form of base pay and benefits, costs keep rising, and the cost/revenue gap keeps widening. By adopting direct compensation strategies that include a broader use of variable compensation, workforce costs can be better aligned with the resources available. Selecting the right incentive programs can provide greater motivation while helping to control workforce costs.