Lessons from Hollywood: How Comp Motivates Different Employee Bases

Total rewards professionals might pick up a few unexpected tips from their local movie theater to help balance the motivations of employees and business units that provide consistent, reliable value with those that strive for innovation and risk-taking.

When Hollywood studios plan their calendar- or fiscal-year film slate, they typically consider “blockbusters” that provide generally reliable returns with “indies” that bring risk but also innovation and the potential for outsized returns.

Much like film studios, successful organizations all have a unique blend of “indie” employees who drive innovation, such as those generally found in research and development (R&D) functions, and the “blockbuster” employees who produce more consistent outcomes, like those frequently found in operations and finance functions.

Designing pay programs for both types of employees can be a challenge. However, understanding and motivating your organization’s “blockbusters” and “indies,” and adjusting compensation components within the total rewards strategy accordingly, can increase the likelihood of long-term “box office” (i.e., shareholder) success.

Going back to the movie analogy, a mature studio like Warner Bros. may release some blockbusters with reliable audiences (e.g., “Minecraft,” “Superman”) and some indies (e.g., “Mickey 17,” “Sinners”). Similarly, mature organizations can afford to fund innovation while maintaining strong performance through more mature business units. In contrast, a newer studio, like A24, might focus first on more creative, risky films (e.g., “Everything Everywhere All at Once,” “Materialists”) before growing the capital and audience familiarity necessary to fund their own blockbusters — much like earlier-stage organizations or high-growth business units.

Reading the Scripts — Evaluating Your Talent Mix

The first step toward designing and differentiating compensation programs is understanding what types of talent you want to incentivize and where they are situated (see figure below). Otherwise said: Which areas of the business house your reliable “blockbusters” and which house your adventurous “indies?”

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Organizations rarely fit into one category and likely have individual business units, and representative employee groups, across the spectrum. To make sense of where their unique talent needs lie, compensation committees may first ask:

Is the prevailing culture more “indie” or “blockbuster?” For example, a newly public organization may have more “indie” employees left over from their high-risk, high-reward startup days.
Is a new talent culture necessary to reach long-term corporate goals? If the long-term objective is to develop a new product or move into a new market, it may be time to seek out indie talent. Conversely, a maturing organization may start to bring in steadier hands that provide more structure.
Are there talent attraction or attrition issues that may stem from a mismatch between motivation and compensation? For example, an organization with a carried interest program may struggle to retain reliable, blockbuster employees, since the pay is very much at risk.
Which business units prioritize stability, and which crave creative leeway? One-size-fits-all approaches may not bring out the best in everyone. Consider an e-commerce company that needs engineering and retail talent. Engineers, especially those from the tech sector, often expect heavier equity compensation than, say, those from the retail world.

Different Talent Types May Desire Different Pay Structures

Total rewards teams use various tools, including direct and indirect solutions, to attract, motivate and retain both types of employees (see figure below).

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Direct Solutions

Direct solutions are typically used in more urgent, acute situations (i.e., high attrition, recruiting challenges) and are viewed as more temporary in nature.

Direct Solution	Set-Up / Function	Purposes and Considerations	Example
Parallel Pay Increasing pay for business-critical functions by shifting the pay philosophy to a higher-target percentile	Identify groups (“blockbusters”) where premium pay positioning philosophies for cash compensation levels are critical.	Can grow external perception and reputation in competitive talent market(s). Can create internal competition to transfer to a higher-paying structure. Defining eligible groups may be difficult.	A high-growth tech company competes in a “hot” talent market. It adopts parallel pay structures to provide greater upside for key target roles without changing the pay structure for the broader organization.
Separate Equity Pools Creating a unique stock-based compensation program for “indies”	Carve out a portion of a mature business that functions, and is rewarded, more like a startup to attract the “indies.”	Recalibrating current cash and equity arrangements is complex. May create internal competition to transfer to a more leveraged pay structure. Has a higher administrative burden.	A legacy tech company operates a high-growth, proof-of-concept business unit. To attract the necessary talent, the compensation programs align with smaller, startup peers.
Choice Program Letting employees choose the equity mix	By allowing bespoke cash-to-equity mixes, plans may be tailored to both “blockbusters” and “indies.”	Usage is relatively rare. Carries a tremendous administrative burden. Heavily dependent on accurate forecasting. Requires educating employees on stock fluctuations to avoid frustration. Provides a cultural risk (e.g., if too many opt for cash, if there is a culture of “have and have-nots,” if payouts are large).	Netflix, a tech company at the intersection of multiple industries, allowed employees to choose their cash-to-equity mix, catering to both entertainment and tech backgrounds.

Indirect Solutions

Indirect solutions are more sustainable but offer limited differentiation, which can reduce motivation for individuals at the more extreme ends of the risk/reward spectrum.

Indirect Solution	Set-Up / Function	Purposes and Considerations	Example
Employee Stock Participation Program (ESPP) Employees can buy stock at a discounted price	Gives “indies” the opportunity to invest in the potential upside while enabling “blockbusters” to retain cash.	May be a valuable tool for attracting talent. Ties employees to the organization financially. Carries a higher administrative burden.	Large organizations with a wide range of talent profiles (e.g., a global banking company) offer some level of risk/reward autonomy while retaining a more simplified overall compensation plan.
Further Individual Differentiation Each employee’s leverage in the incentive program(s) is set based on their role and performance	Allows for greater flexibility to retain top and critical talent across both “indies” and “blockbusters.”	Requires targeted implementation of an annual bonus plan, if not already established. Necessitates strong performance management. Complex criteria for selection.	A small fintech company that wants to compete with top-tier tech companies for key talent provides top-of-market equity grants.
Executive Excellence Awards One-time equity awards granted to key employees	Equity is pulled from a pre-determined pool at the beginning of the fiscal year (<5% of the equity budget); it can be used to reward either “indies” or “blockbusters.”	Can help mitigate retention issues. Must be used sparingly. May create internal friction.	After a company achieved a key strategic milestone, it rewarded key individuals.

Rolling Out the Red Carpet

In Hollywood, the dichotomy between “blockbuster” and “indie” films is not quite as clear-cut as stated, and employees will not typically be boxed into one category, either. Organizations must first diagnose their talent, then apply appropriate compensation levers to incentivize the respective risk/reward profiles. This can help to determine if the appropriate talent is available to help “write” the organization’s success story.

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