Evolution of Incentive Plan Goal-Setting Through Transformation

Leading Retailer Case Study

Compensation in Special Situations

Evolution of Incentive Plan Goal-Setting Through Transformation

Business Situation

Our retail client grew rapidly in the 2000s and had a fleet of over 1,000 stores by the 2010s. However, by the middle of the decade, the Company’s sales declined precipitously as mall traffic dropped off and consumer interests shifted. As a result, the Board initiated a “re-boot”, appointed a new CEO, and overhauled the leadership team to guide the Company through the next stage of its business. Our firm was hired in the midst of the transformation (and a year before the CEO transition) and has supported the business through its ongoing transformation efforts.


The company’s immediate challenge at the time was to stabilize financial performance to invest for future growth—all without sacrificing employee engagement.
Simultaneously, the newly appointed leadership team was communicating its multi-year plan to transform the business and then to grow. The key transformation initiatives included a shift to a customer-centric model, store network optimization, omnichannel investment and expansion, and a global focus.

From a compensation perspective, the primary challenges were (i) to identify how best to support the multi-year strategy that included business stabilization and growth elements and (ii) how to calibrate incentive plan goals relative to the company’s aspirational multi-year performance trajectory.

Our Impact


We worked with the company to shift the measures through the different stages of its transformation. When the company was stabilizing, the annual incentive design balanced a pre-tax profit metric and included an operational scorecard that could modify the result. In the next phase, the focus shifted to profitability. The long-term plan was focused on value creation (ROIC) and shareholder outcomes (relative TSR) as the company transformed. Sales was added once the company shifted its focus towards growth.

We recommended a framework to goal-setting through transformation that closely reflected the nature and stages of the performance trajectory: Stabilize, Transform, and Accelerate. Performance targets and ranges around targets were the critical levers to support the strategy throughout this period. In the stabilizing phase, there was more focus on getting people into the money early and working towards target. As the company began to transform, the company tightened the ranges to raise the performance bar.


In the period since the transformation announcement, management made significant progress against nearly all the strategic objectives. The company effectively shifted to a customer-centric model and repositioned its brands. Financial highlights include a significant increase in annual digital sales, a return to meaningful profitability, and consecutive years of sales growth. As a result, the company share price has grown 300% from the low point prior to the transformation strategy announcement.

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