Andena's Thought Capital
Feature
Non-Financial Metrics: At-Risk or Lay-Up?
The use of non-financial metrics has become a common fixture in executive incentive programs as they are often seen as critical drivers of business performance. Metrics such as sustainability, employee engagement, and strategy commonly complement traditional financial and operational measures in the annual corporate scorecard, and at times in the long-term incentive program. On the surface, this appears to be progress: broader measures of corporate performance providing a more nuanced linkage between pay and performance. But a closer look raises an important question: are non-financial metrics truly at-risk and subject to business outcomes, or do they inflate bonuses and insulate executives from underperformance?