Are You Rewarding Progress or Just Paying the Past?

Every incentive plan is a mirror. Some mirrors show strength, clarity, and purpose. Others? They’re fogged up. What does yours say about you?

FW Cook’s 2024 Annual Incentive Plan Report reveals more than trends; it uncovers truths.

With insights drawn from the top 250 companies in the S&P 500, it shows where leadership priorities are shifting and how incentive plans are evolving to reflect them.

These insights aren’t just for reflection. They’re for action.

As someone who works closely with leadership teams to align talent strategies with organizational goals, I see how critical these reflections are.

Incentive plans, like executive recruitment, shape the culture and future of an organization. Both are tools to align people and strategy in pursuit of success.

Clarity Wins

93% of companies now use formulaic incentive plans; up from 88% in 2022 and 83% in 2019.

Why? Because clarity builds trust. Teams that know exactly how success is measured focus better. They perform better.

The best companies remove ambiguity. They define their goals and align their rewards with purpose.

Does your plan leave room for doubt? Are your leaders guessing what success looks like, or are they crystal clear on how to hit the target?

When clarity is missing, confusion takes over—and let’s face it, confused teams don’t win championships.

Looking Beyond the Numbers

While financial results still dominate, 79% of companies now include non-financial measures like ESG metrics and team-based goals.

Nearly 8 in 10 plans emphasize Environmental & Sustainability and Human Capital priorities.

These changes aren’t cosmetic. You can’t slap an ESG metric on a spreadsheet and call it progress. The real question is: Are you telling a story your team and stakeholders believe, or one they roll their eyes at?

In my work helping organizations recruit transformative leaders, these shifts in priorities are telling. The metrics you measure, and reward, will attract and retain the talent aligned with your vision.

The Power of Teams

Collaboration is king. Individual performance metrics are down to 35%, while team-wide goals have risen to 67%. Companies are making a clear statement: success is shared.

Gone are the days of rewarding lone wolves. The focus is on leaders who empower their teams and drive collective results.

What does your plan prioritize? Is it rewarding collaboration, or promoting silos?

When evaluating leadership, I often ask: Does this person inspire and align others, or are they running their own race?

Stretch, Don’t Snap

Goal-setting is an art. Too ambitious, and it overwhelms. Too easy, and it underwhelms.

The best companies set targets 4–5% higher than the prior year’s performance, ambitious, yet achievable.

But not all metrics behave the same way. Take cash flow, for example: companies set thresholds with wider ranges to reflect its inherent unpredictability. Revenue, on the other hand, is more stable, with narrower ranges.

Are your targets pushing your team just enough to grow, or are they setting them up to fail?

This principle applies to both leaders and their teams: alignment between ambition and capacity creates the right environment for growth.

ESG’s Evolution

ESG metrics aren’t just staying, they’re shifting.

Environmental and Human Capital measures are rising in prominence. This refinement signals that companies are getting more specific about what matters to their stakeholders.

If ESG is in your plan, ask yourself: are you tracking what truly aligns with your organization’s goals, or defaulting to what’s easiest to report?

When ESG metrics are deliberate and aligned with purpose, they attract leaders who can shape and elevate your organization’s vision.

The Danger of Mediocrity

Poorly designed incentive plans don’t just fail, they harm. They stifle ambition, discourage collaboration, and erode culture.

Is your plan quietly undermining your leadership goals, or inspiring your team to reach higher?

The right plan aligns rewards with values. It encourages boldness and collaboration. Anything less is a missed opportunity.

The Bottom Line

2023 was a strong year for the top 250 companies. Median CEO payouts hit 127% of target, driven by 7% growth in revenue and operating income, and a 16% median total shareholder return.

This alignment between performance and rewards is what makes incentive plans more than just compensation tools, they’re signals of culture and priorities.

The leaders you bring on board and the metrics you measure set the tone for everything else. Together, they define your story.

Set the Compass

Incentive plans aren’t just about today, they shape tomorrow. They tell a story to your team, your board, and your stakeholders about what matters most.

Your plan isn’t just a roadmap, it’s a compass. It points to the values and behaviors that define your organization’s future.

Read the full report here: Executive Incentive Plan Insights: A Must-Read from FW Cook

Website here: Executive Compensation | FW Cook