Don Lowman’s team at Korn Ferry just published the latest edition of their Global Total Rewards Pulse Survey, pulling responses from nearly 8,000 organizations across 152 countries. Most of the headlines are about pay transparency, AI, and how few people understand their own employer’s reward strategy. We’d encourage Total Rewards leaders to scroll past those for a moment and sit with one of the quieter findings, because it’s the one with the most quietly explosive implication for how a bonus plan actually works.
The finding: most surveyed organizations paid bonuses at or above target in the prior fiscal year, and a majority expect to do it again in 2026. Korn Ferry frames this as continued performance alignment with softening optimism, and notes that “incentives will remain a critical lever, but organizations may face pressure to sharpen performance measures and payout calibration.” That sentence is doing a lot of polite work. We want to translate it.
Here’s what we think it means for the HR and Total Rewards leaders designing variable comp programs underneath that data.
“At or above target” is not, by itself, a victory
It is tempting to read the Pulse Survey number as a sign that bonus plans are working. Targets are being hit. Money is moving. Employees are getting paid. In our experience, that’s the wrong read. A bonus plan in which the modal outcome is at-or-above target, year after year, is a plan whose targets have stopped doing the work targets are supposed to do.
A target is a binary signal: this is the line above which we collectively agree the company has performed well enough to fund a meaningful payout, and below which we agree it has not. The line only carries meaning if it’s possible — and reasonably common — to land on either side of it. When the line is cleared every year by virtually everyone, it has stopped being a signal at all and started being a starting point.
Korn Ferry’s polite phrase — “sharpening performance measures and payout calibration” — is what you say when you mean: the goal-setting process has drifted into the territory where the plan is more or less guaranteed to fund itself. Once that has happened, you no longer have an incentive plan. You have a deferred component of base pay with paperwork.
How a STIP slides into entitlement, in three steps
We see this pattern often enough that the steps are predictable.
1. The target gets benchmarked against last year’s actuals instead of against a real plan. Goal-setting that begins with “what did we hit last year?” instead of “what does the business need to be true twelve months from now?” anchors the target to the past. Once the actual is a habit, planning a target much above it feels aggressive, and planning a target much below it feels defeatist. So the target lands close to the actual, and the cycle reinforces itself.
2. Subjective overlays absorb the variance. Most plans have a discretionary modifier somewhere — a multiplier on individual performance, a committee adjustment to the funded pool, a manager allocation step at the end. These overlays are designed to add nuance, but in practice they more often absorb downside variance. When the funding math says 92%, the overlay quietly nudges it to 100%. When the math says 105%, the overlay accepts it. The overlay’s role becomes less about reflecting nuance and more about smoothing out an awkward number into a comfortable one.
3. Communication catches up to the new reality. Over a few cycles, employees and managers learn that target funding is the practical floor. Recruiting collateral starts to describe the bonus opportunity as an expected component of total cash compensation. New hires negotiate against it. The plan is no longer a variable-pay program in any meaningful behavioral sense; it has become a deferred fixed component of pay that everyone has agreed not to talk about that way.
None of those three steps is irrational on its own. Each is a perfectly reasonable accommodation. The trouble is that together they convert a plan that was supposed to fund based on performance into a plan that funds based on momentum, and the only people who benefit from that drift are the ones who are no longer performing at the level the plan was originally designed to reward.
What “sharpening calibration” actually requires
Korn Ferry is right that calibration is the lever. It is not, however, a soft lever. Calibration as a real practice means three things, in our experience.
Real downside has to be live. A payout curve that bottoms at 80% does not test whether the plan can withstand a year in which the business actually misses. If the plan’s lowest realistic outcome is “only somewhat below target,” the plan is calibrated for entitlement, not performance. The fix isn’t to set new low-side thresholds in theory; it is to walk the comp committee through a year in which the plan funds at 60%, and to make sure everyone — leadership, finance, HR — knows what that year looks like in practice and is prepared to let it happen.
Targets have to outlive the prior actual. The single most useful discipline in goal-setting is the requirement that target be defined before the prior year is closed. When goal-setting waits until February and uses the just-closed-out actuals as the anchor, the target is contaminated. When goal-setting is locked in October against the strategic plan and ratified after Q4 closes only with major-event adjustments, the target is honest. Same plan, very different incentive behavior.
The overlay needs an explicit role. Subjective adjustments are not the problem. Subjective adjustments without a documented purpose are the problem. The plan should be explicit, in writing, about what the discretionary lever exists to correct for — material events outside the goals, exceptional individual performance, structural calibration errors — and the comp committee should be willing to leave a 92% number at 92% when none of those triggers apply. Until that happens, the overlay is not nuance. It is dilution.
The communication challenge runs alongside
Korn Ferry’s broader Pulse Survey finding — only 24% of organizations communicate reward strategy with any meaningful detail — runs in parallel here. A bonus plan that has slid into entitlement is hard to recover precisely because no one has talked about why it exists in its current form. Employees and managers build expectations around what they see, not what was originally designed. Recovering the plan’s behavioral teeth is partly a calibration project and partly a narrative project: helping the workforce understand why a year of partial payout is the system working as intended, not the system breaking.
That second piece is the one HR leaders most often underestimate. The first time a recalibrated plan funds at 70%, the question every employee asks is “did something go wrong?” The right answer is: “no, this is what the plan looks like when the goals are honest. Last year was not the floor. Target is not the floor. Performance against goals is the floor.” A plan that cannot say that to its participants will not stay calibrated.
Closing
Korn Ferry’s Pulse data is a useful mirror. It is telling us that across thousands of organizations, the bonus plan is funding at or above target with a kind of steady regularity that ought to make Total Rewards leaders curious, not comforted. Some of that is real performance. Some of it is calibration drift. The plans that will hold up best over the next few years are the ones whose owners are willing to ask, honestly, which is which inside their own program.
If you’re looking at your STIP and wondering whether “target” is still doing the work of a target — and you’re looking for tools to simplify how you manage and administer the plan once you’ve gotten the design right — let’s talk.