Decisions about total rewards are never more important than when a company is embarking on a new strategic direction. At many organizations rewards policies are cumbersome and not recognized as a critical element of a new business strategy. Total rewards represent a significant investment for most organizations. Along with salary, culture, work environment, career, and benefits comprise the construct of total rewards, framing what employers offer employees in exchange for their contributions and achievements.

Like any significant investment, total rewards must align with the organization’s strategic objectives. This means that when strategy changes it’s likely that some degree of change will be appropriate in rewards. Organizations that look to their employees to drive transformation through higher levels of individual and collective achievement are increasingly dissatisfied by rewarding them through traditional salary increase and variable pay programs.

A promising alternative for these organizations is achievement-based compensation (ABC). What is unique about this solution is that it rewards employees at the appropriate time for both short-term results and capability growth. Achievement-based compensation is predicated on making more employees eligible for variable pay offering meaningful incentive opportunities if possible. Simple programs make it possible for employers to reward their employees for their achievements in one performance period without increasing fixed compensation costs for the next, which has powerful advantages.

ABC leads to more effective communication about the nature of performance expectations and better allocation of compensation investments by aligning reward vehicles with the nature of achievements being rewarded. Rewards in all their forms are the most powerful way to show employees what is important and how they are expected to contribute to the organization’s success. Organizations need managers and leaders who can apply the energy of powerful new rewards to direct everyone toward the organization’s future goals.