In twelve of our shops, an annual team award paid nothing below 100% of sales plan and ₹12,000 at or above it. That made the boundary unusually consequential. A team at 98.8% received no award, while one at 100.2% received the full amount. The sales difference between those examples was 1.4 percentage points, but the payment difference was ₹12,000 per eligible person. The formula created that experience even if every calculation was administered correctly.
In 2023 I recommended a more gradual design for three hundred eligible adults. It paid zero at or below 90%, then ₹1,000 per percentage point above 90%, capped at ₹20,000 at 110%. The board approved a maximum ₹60 lakh annual envelope with qualified reward and employment review. This is an invented team-award example, not guidance about statutory bonus obligations or an assurance that the same design would be appropriate in another enterprise.
A small performance difference carried a large payment difference
The old cliff could be described clearly in a sentence, which made it administratively attractive. Simplicity of wording did not make its consequences small. A colleague near the threshold could experience a minor difference in the measured result as the difference between receiving an award and receiving nothing. A people leader should examine that experience before assuming that an easily communicated scheme is also a proportionate or persuasive one. The calculation and the human interpretation deserve to be considered together.
The two examples helped us make the concern specific. At 98.8%, the replacement would pay ₹8,800; at 100.2%, it would pay ₹10,200. The gap between those payments was ₹1,400 rather than ₹12,000. That was an arithmetic consequence of the proposed curve, not evidence that motivation, retention or store profit would improve. We could explain the design change without attaching an outcome claim that the example did not measure. A useful proposal need not pretend that its behavioural consequences are already known.
It also mattered that we were discussing percentage points above a defined sales-plan level. Loose language about a percentage increase could obscure how the award was calculated. The examples needed to show the inputs and the resulting amount plainly enough for a manager to explain them. A colleague should not have to infer the formula from a celebratory statement about a new reward approach. Precision in the explanation was part of the people decision, rather than a detail to be left until after approval.
The board's concern could reasonably include affordability, the basis of the measure and the experience created around different results. Those questions cannot be collapsed into whether the curve looks smoother on a chart. Sales plan remains a measure whose suitability needs examination in the actual business. The replacement changed the payment relationship; it did not demonstrate that every shop had comparable conditions or that the chosen performance measure captured every contribution the organisation valued. Those are further design questions, not automatic benefits of removing a cliff.
The replacement must disclose its own choices
Exactly 100% exposed the tradeoff particularly well. Under the old scheme it paid ₹12,000. Under the replacement it paid ₹10,000. A description that mentioned only the new award available below full plan would conceal that some people could receive less for the same measured result. I wanted that consequence in the board paper and the manager explanation. An honest proposal should survive the example least convenient to its promotional story, rather than depend on selecting only favourable points along the curve.
The higher cap was another choice, not a free improvement. At 110%, the replacement reached ₹20,000 and stopped increasing. Three hundred people multiplied by that cap produced the ₹60 lakh maximum annual envelope. The ceiling did not describe expected or actual payout. It also did not establish profit, affordability under every circumstance or the appropriate accounting treatment. Its value in the decision was to make the outer payment limit visible within the specified population and design, with the required qualified review retained.
Managers needed to understand that a gradual formula can still have boundaries. There was no award at or below 90%, and no additional payment above the cap. The design did not become neutral merely because one sharp threshold was replaced. It expressed judgements about the starting point, rate and maximum. Those judgements should be open to challenge in their own terms. A CHRO's task is not to make the formula appear inevitable, but to explain the choices well enough that the appropriate owners can decide responsibly.
The transition also required care in language. Calling a scheme fairer without explaining whose result changes can make a complicated judgement sound settled. We could state that the formula reduced the specified payment cliff and show the arithmetic. We could not infer universal fairness from that fact alone. Different participants might reasonably evaluate the change differently, particularly where the same measured performance would pay less. The organisation should be prepared to hear that response without treating a mathematically correct explanation as the end of the conversation.
Approval is the start of a credible explanation
Board approval gave the design and maximum envelope authority. It did not prove that every eligible colleague understood the replacement or accepted its tradeoffs. Managers needed preparation to explain actual examples, distinguish the new calculation from the old one and direct unresolved questions appropriately. The people function had responsibility for that preparation while store operations retained its remit. An award scheme is encountered through those conversations as well as through its formal terms, and both need an accurate account of what has changed.
The same discipline applies when reporting the programme later. A lower payout is not automatically a saving attributable to better reward design, and a higher payout is not evidence of stronger motivation. Changes in the measured result, population and business conditions would need to be understood. This case records an approved formula and ceiling, not a completed causal evaluation. Preserving that boundary prevents the reward story from acquiring benefits simply because the revised curve is easier to defend than the original cliff.
I would bring this way of examining a proposal into a board discussion without trying to operate the scheme from outside management. Directors can ask which examples reveal the tradeoffs, whether the payment ceiling is understood and how the organisation will explain the change. They can expect qualified review where needed and evidence appropriate to any later outcome claim. The practical test is whether the proposal remains credible when the reader sees both the person who receives something previously unavailable and the person who receives less than before.