Executive Performance Management and Pay for Performance Program
Overview of Approach:
Kingston General Hospital (KGH) has a comprehensive executive performance management program that includes pay for performance. Guided by Board policy, our performance management and compensation philosophy for executives incorporates the following:
- Alignment of long term strategy and annual corporate plan milestones with individual performance goals
- Annual performance agreements with goals, measures and targets
- Quarterly review and reporting of progress against performance agreements
- Recognition and reward for performance against established targets at end of the fiscal year
A special Board committee, the Senior Leadership Assessment and Compensation Committee (SLACC) is responsible for the oversight of the executive performance management and pay for performance program. To date, the focus of SLACC has been on the Chief Executive Officer (CEO) and Chief of Staff (COS), both of who report directly to the Board. The CEO is responsible for designing and implementing performance plans for the rest of executive team that are aligned with those approved by SLACC. The SLACC receives reports from the CEO on the performance plans of executives and their progress against those plans.
Program Description:
Each year the Board sub-committee, SLACC, will establish Performance Agreements in consultation with the CEO and COS. These agreements specify the milestones and performance targets to be achieved for the upcoming fiscal year. The weighting of the eligible performance pay for each of the agreed upon elements of the plan are also identified. Once approved by the Board, the performance agreement is signed off by the Board Chair and CEO. Once the CEO agreement is confirmed, performance plans for the rest of the executive team members are created and they are aligned using the same framework.
Accordingly, our performance based compensation system includes performance against four categories:
- Achieving annual corporate plan results (20%)
- Demonstrating leadership that is advancing the long term strategy of KGH (40%)
- Achieving Quality Improvement Plan targets (30%)
- Implementing individual learning plan which is based on 360 feedback results (10%)
Of note is that the milestones, targets and performance pay allocations for categories one and three are the same for each of the executive team members. This approach helps to drive alignment and collective accountability across the executive team for organization wide priorities. For category 2, each individual has 3-4 goals that are specific to their roles and responsibilities and learning plans are also individually based and include up to 3 long term goals. The 360 degree feedback process is conducted for all executives once every two years.
The SLACC monitors progress against the Performance Agreements on a quarterly basis and reports this to the Board. The CEO in turn, reports on a quarterly basis as to how the executives are doing against their individual performance plans. Quarterly results that relate to the annual corporate plan and quality improvement plan are posted publically on our website in the “KGH this Quarter” report.
At the end of the fiscal year, the SLACC does an in depth review of the performance of the CEO and COS, and then makes an assessment of whether or not they have succeeded in achieving the annual performance thresholds as defined in the plan. Performance pay amounts are not finalized until actual results are achieved and financial audits are complete. SLACC makes a recommendation to the Board for performance pay allocations and any other compensation adjustments according to Board policy. Once CEO performance has been evaluated, the CEO conducts performance reviews and allocates pay for performance for the rest of the executive team against results achieved.
A summary of the executive compensation plans for KGH executives is provided in Appendix 1, which also has links to the contracts for each executive team member.