By Steven Sullivan, principal, Pearl Meyer

As a result of industry shifts, healthcare organizations are now adopting more sophisticated approaches to variable compensation in order to properly align executive performance, business strategy, and pay. These more complex incentive programs are relatively new to healthcare, and typically have more moving pieces than the industry’s more traditional “salary and bonus” approach. Newer programs often include both annual and long-term incentive plans, in addition to base salary, and represent new challenges in calibrating performance, total direct compensation level, market positioning, and cost. A carefully designed executive compensation program can be a powerful connection between the executive team and the board’s vision, but only if it is properly evaluated and maintained.