There are several approaches to the diversification of annual incentive plans. Given the uncertainty we’re facing right now, companies may want to vary their annual incentive plans to have a higher probability of a desirable payout.
Changing the mix of measures in the short term incentive plan to increase the weight of operational or strategic goals can de-lever some of the risk involved with goal-setting. Introducing non-financial metrics reduced overall risk.
Financial objectives are great for investor outcomes, but they may not be under the control of an executive. Therefore, in times of uncertainty, strategy, operations, and ESG measures as measures give executives a sense of control.