WTW recently walked compensation committees through five strategies for setting incentive-plan goals in volatile markets. Widen the performance ranges between threshold, target, and maximum. Drop the financial triggers that switch the plan off in down years. Use target zones instead of single point estimates. Adopt non-linear payout curves with extra inflection points. Lean harder on relative metrics like TSR or peer-group operating margin. The piece’s underlying argument is that, when future outcomes are genuinely unclear, a more flexible architecture keeps plans “motivating, fair and aligned with shareholder interests.” You can read it here.
Every one of those five moves makes sense at the comp committee table. They protect defensibility in a 10-K and they keep executive payouts from looking either windfall or punitive when the economy lurches. But there is a different conversation happening one or two layers down the org chart, where the same plan funds bonuses for a few thousand people who do not sit in the boardroom. In our experience, the flexibility that protects an executive plan does not automatically translate into a better employee STIP — and importing it without thinking can quietly transfer cost and confusion from the comp committee to the employee.
Here is what we think this means for HR and Total Rewards leaders staring at the same volatility WTW’s audience is staring at.
1. Widening the range protects shareholders. It can quietly tax employees.
In a small-population executive plan, widening the threshold-to-target range is a defensive move. It costs the company a little extra in soft years and protects upside discipline in strong ones. In an employee STIP funded out of operating margin, the same widening compresses the felt distance between “we hit the year” and “we missed but you still got paid.” That distance is where the bonus does its motivational work. Squeeze it too far and you have not made the plan more flexible — you have made it more arbitrary.
In our experience, the right move in volatile years is not usually to widen the range. It is to be more specific about what the range is measuring. A 70%-to-130% payout corridor against a goal nobody can articulate is just noise. The same corridor against a goal an employee can see, influence, and recognize at year-end is a real plan.
2. Eliminating financial triggers is a comp-committee move. For employees, the trigger is the conversation.
WTW’s point is fair on its own terms: a hard financial trigger that turns the plan off in a down year can leave non-financial achievements unrewarded, and it can look heavy-handed in disclosure. But the trigger is not just a math rule. It is a conversation HR has to have, once, at the start of the year. “Here is the floor. Below this, we do not fund. Above this, we do.”
Take that conversation away and you do not get more fairness. You get a year-end debate about discretionary funding that nobody on the receiving end can predict, plan around, or trust. Triggers are unpopular with comp committees precisely because they are load-bearing. Removing them transfers the load onto committee discretion, which from an employee’s seat is indistinguishable from a coin flip. If you are going to soften a trigger, soften it explicitly — publish the override rules, do not bury them.
3. Target zones work for revenue. They struggle with line of sight.
A $980 million to $1.02 billion target zone is a clean concept when the bonus in question rewards a CEO on company-wide revenue. The CEO is one person, the zone is one number, the bonus is one decision.
Push the same design into a 2,000-person STIP and you have created a system where every department, manager, and individual has their own implied zone that nobody can quite explain. Most employees we have worked with care less about whether the band is wide and more about whether their personal performance line of sight is intact. Target zones at the company level can work if — and only if — the cascade down to individual or team metrics stays singular. One number, one expectation, one reward an employee can map onto their own year.
4. Non-linear payout curves reward calibration. They are not a substitute for it.
The smoother-curve idea is good design instinct. Flatter slopes near target, additional inflection points, fewer cliff edges where a percentage point of performance moves the payout by a third. We are for it. But it does not fix the upstream problem that almost every bonus plan we audit has: payouts cluster at-or-above target year after year, not because of strong performance, but because nobody wants to be the manager who downgrades a 3 to a 2.
A non-linear curve in a poorly-calibrated plan just spreads the mush. Before redesigning the curve, audit last year’s outcomes by team and by manager. If 85% of your population landed in the same payout band, the curve is not the problem. The rating distribution is. Fix that first, and a simpler curve will do more work than a more elegant one.
5. Relative metrics are a CEO tool. For employee STIP, they are a communication problem.
Relative TSR works for a CEO because the comparator group is a finite, named list of companies and the metric is reported quarterly in places everyone can see. Try explaining “your bonus this year depends on how our adjusted operating margin compares to a custom peer group’s GAAP-adjusted figures over a trailing twelve-month cutoff date” to a sales operations team and you have made the bonus less motivating, not more. You have outsourced the explanation to a chart in next year’s proxy.
If volatility is making absolute goals hard to set, the answer for an employee STIP usually is not relative metrics. It is a shorter measurement period — one half, then the next half — with calibration between them. Keep the math simple enough that an employee can recognize themselves in the result.
What we would tell HR leaders looking at the list
Flexibility is a real instinct, and we are not arguing against it. The bonus plans that survive 2026 are not going to be the ones that hard-coded a single revenue target in January and white-knuckled it through tariff news, a soft Q2, and a strong finish. The question is which flexibility you adopt, and where you spend it.
There are really two flexibilities here, and they are easy to confuse. The first is the flexibility a comp committee needs to defend executive payouts in a 10-K and a proxy: wider ranges, softer triggers, relative comparators, smoother curves. The second is the flexibility an employee needs to feel like the plan is still on their side: a clear floor, a stable target, a payout they could have predicted in advance within a reasonable band.
The first flexibility is mostly about math. The second is mostly about clarity. In our experience, most bonus plans get into trouble when they import the math-side flexibility without rebuilding the clarity-side commitment — when a redesign aimed at the boardroom quietly washes over the 2,000-person workforce that funds it.
If you are looking at WTW’s list and wondering which of the five moves to bring into your employee STIP for 2026, the test is simple. Would the average employee in your plan be able to explain what changed, and why, in one sentence? If yes, run it. If no, the flexibility you are adopting is not really flexibility — it is just noise the comp committee can defend and the employee cannot.
If you are looking for tools to simplify how you design, administer, and communicate variable pay — including the harder work of making the math legible to every person on the receiving end — let’s talk.