I want to promote my top project manager to the Chief Operating Officer seat on our Accountability Chart, but they are hesitant because they will lose their project-based bonuses in exchange for a flat executive salary. How do I structure a leadership team compensation package that rewards enterprise value creation rather than individual project delivery?

Question

Tyler Smith · Accepted Answer

Moving a high-performing manager into an executive seat on your Accountability Chart requires a fundamental shift in how they are compensated. If their pay remains tied to individual project delivery, they will continue to behave like a project manager rather than a strategic leader who owns the health of the entire company.

To align their interests with your exit goals, you must transition them to a performance-based compensation plan that rewards enterprise value creation.

Start by setting a competitive base salary that reflects their new level of executive responsibility. This provides the financial security they need to step away from daily project execution.

Next, replace their project bonuses with an executive bonus pool that is tied directly to the achievement of company-wide goals. This pool should be triggered by hitting specific quarterly or annual milestones on your V/TO®.

- Link fifty percent of their bonus to the overall profitability and revenue targets of the company.
- Link the remaining fifty percent to the completion of their individual and departmental Rocks.

This dual structure forces them to focus on both their specific departmental responsibilities and the collective success of the leadership team. When their financial upside is tied to the value of the business as a whole, they will naturally start thinking and acting like a true owner.