To achieve today's aggressive revenue growth goals, organizations will require a 23% increase in leader performance. But paying leaders more won't get them but a 2% performance improvement. Incenting leaders on top-line organizational business outcomes falls short, too. In fact, all conventional approaches using rewards together only increase leader performance by 5%.
Improving line of sight is key: clearly articulating the relationship between what a leader does and how she is paid improves leader performance by up to 33%. Unfortunately, almost 3 in 4 leaders don't perceive any connection between their performance and their rewards.
To rebuild line of sight, the best companies focus pay plan design on rewarding individual contributions to business outcomes; differentiate pay for high- versus low-performing leaders; and enable pay transparency among both current leaders and leader candidates.