Leading Retailer Case Study

The company had pursued North American expansion that was ultimately deemed unsuccessful. The company drew back, with a significant impact on the stock price. Around the same time, the company publicly announced a transformation plan focused on driving growth and repositioning the business.

After pulling out of expansion, the company had a massive write-down. Outdated goals for performance awards were no longer in line with current company strategies. Proper alignment was needed to ensure management’s incentivization for commitment to the updated strategy.

Additionally, the company had to ensure that the goals were attainable and properly time-oriented. The company had already realized the loss from the failed expansion and need to work toward offsetting this immediately.

We introduced a special Strategic Alignment Award to be measured over the span of two years. The awards aligned directly with the transformation initiatives and complemented the relative metrics in its ongoing performance unit program.

The metrics focused on the specific sales channels that the client was hoping to improve, as well as EBIT growth to ensure that this was done profitably. A modifier was also introduced to incentivize the effective allocation of capital to drive this profit. As the first phase of broader transformation was to accelerate performance on the retail fundamentals, the metrics were effectively designed to support the CEO’s push.

The award values ranged from 0.5x to 1.25x of regular annual award values. This provided significant incentive to executives without overspending during a time in which the company did not have the ability to do so.