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On 21 April, a new appointment of Alveria Talks, the webinar series dedicated to the evolution of HR systems and performance management. The webinar, "From theory to practice: LTIs that really work", was attended by Filippo Cannavò and BCA Legal, which explored the increasingly strategic role of the Long Term Incentive (LTI) systems, analysing critical issues, regulatory constraints and evolutionary opportunities.
In recent years, Long Term Incentive schemes have assumed a central role in Total Reward policies, especially in regulated contexts such as banking, insurance and listed companies. This growing relevance is the result of two converging pushes: on the one hand, an increasingly complex regulatory framework and stringent; on the other hand, the need for organisations to orient managerial decisions towards sustainable long-term goals.
It is precisely at the intersection of compliance and performance, however, that a structural criticalityMany LTI systems, while formally correct, fail to truly impact organisational behaviour. The webinar explored this tension by proposing an integrated reading that starts from legislation, crosses governance and arrives at the concrete experience of managers, identifying conscious design and digitisation as decisive levers of evolution.
The regulatory perimeter: constraint or design opportunity?
In the supervised sectors, the design of LTI systems is part of a complex regulatory framework, which not only defines the quantitative limits of variable remuneration, but also guides its qualitative principles.
In the banking sector, For example, the regulations impose a strict relationship between fixed and variable components, including in the latter also elements traditionally considered accessory, such as non-competition agreements or exit mechanisms. In this context, non-compliance may entail not only reputational risks, but also the nullity of clauses and sanctions.
In the insurance sector, albeit with greater flexibility, the regulatory framework still directs corporate choices towards similar levels of balance. In listed companies, on the other hand, transparency towards stakeholders and the public formalisation of remuneration policies become indispensable elements.
A clear reading emerges: legislation is not just a constraint, but a real design framework. The challenge for HR functions is to transform these constraints into a coherent system capable of supporting sound, reasoned and defensible decisions.
The hidden fracture: when the system does not speak to managers
In the face of a well-established regulatory framework, a significant gap between LTI systems and their recipients strongly emerges. Many managers perceive these instruments as opaque, complex and difficult to relate to one's everyday actions. The risk is that the incentive loses its orientation function, turning into a deferred pay component, disconnected from actual performance.
This fracture is often the result of a design that prioritises technical correctness and regulatory compliance, neglecting the experiential dimension. KPIs that are difficult to influence, mechanisms that are difficult to read and discontinuous communication contribute to amplifying this gap. Overcoming this limitation requires a paradigm shift: it is not enough to explain complex systems better, but it is necessary to design systems that are, from the outset, understandable, transparent and meaningful to those who use them.
Governance and practice: between formalism and decision-making capacity
Another central issue concerns the governance of incentive schemes. In regulated contexts, the presence of remuneration committees and control functions is well established, but their effectiveness depends on the ability to integrate technical expertise and operational vision.
In the banking sector, governance tends to be highly formalised, with the risk that decisions are driven more by procedural logic than by a real understanding of management dynamics. In other contexts, such as insurance, greater operational maturity can be observed, but the dialogue between compliance and business remains crucial.
Issues such as golden parachutes, the principle of proportionality or the definition of materiality thresholds show how the regulations leave ample room for interpretation. It is precisely in these spaces that the quality of governance is measured: in the ability to motivate, document and support choices, not simply apply rules.
From complexity to clarity: rethinking LTI design
One of the most relevant messages that emerged from the webinar concerned the possibility of simplifying LTI systems without compromising their rigour. Simplification does not imply a reduction of technical complexity, but its reorganisation in a readable key. It means designing KPIs that are clearly linked to managers' decision-making levers, making the interdependencies between individual and corporate results explicit, and building delivery mechanisms that are predictable over time.
In this context, the narrative dimension becomes an integral part of design: An incentive system must be clearly explained in order to be understood and thus acted upon. An LTI that cannot be explained will hardly be effective.
The enabling role of technology
The increasing complexity of LTI systems makes effective management based on traditional tools increasingly difficult. In this scenario, technology emerges as a key enabling factor.
Digitisation makes it possible to ensure regulatory compliance, manage multiannual splitting, track operations for audit purposes and make information accessible to beneficiaries. Particularly relevant is the ability to clearly visualise the relationships between KPIs, performance and reward over time. This transparency directly contributes to enhancing the engagement of managers, making the system more understandable and effective.
It is precisely in this context that a HCMS evolved can make all the difference. In fact, an integrated platform makes it possible to translate regulatory and design complexity into structured processes, coherent and easily governed, reducing the risk of errors while ensuring full traceability. Through advanced features for configuring incentive plans, scenario simulation and continuous performance monitoring, the’HCMS allows HR functions to move from reactive to proactive and data-driven management. At the same time, it offers managers a’clear and accessible experience, making objectives, results and potential rewards visible throughout the life cycle of the plan. In addition, the platform flexibility allows LTI systems to quickly adapt to regulatory and organisational changes, maintaining consistency between policy, execution and communication.
In this sense, the’HCMS is not just an operational tool, but a real strategic enabler, capable of connecting governance, design and user experience in a single ecosystem.
Towards a new generation of LTIs
The outlined picture shows an ongoing transformation: LTI systems are evolving from predominantly formal tools to strategic levers capable of guiding behaviour and sustaining performance over the long term.
This evolution requires an integrated approach that holds together three fundamental dimensions:
- regulatory soundness and governance capacity
- the quality of technical design
- the concrete experience of managers
It is in the balance between these elements that the effectiveness of incentive systems is at stake, a balance that requires systemic vision and orchestration skills on the part of the HR functions. Rethinking LTIs today means going beyond the logic of mere compliance and questioning their real capacity to generate value. The challenge is not to build systems that are perfect on paper, but systems that work in practice: capable of translating long-term goals into everyday behaviour, of making the link between action and result visible, and of being perceived by managers as guidance tools, not constraints. In this scenario, HR functions are called upon to play an increasingly strategic role: not just guarantors of compliance, but real architects of incentive experiences, capable of connecting rules, technology and people.
Upcoming Alveria Talks
The next webinar, scheduled for 14 Mayo, will be dedicated to the topic of Talent Management. The meeting, entitled “Rethinking Talent: how to unleash the potential diffused in organisations ”, will explore how to overcome an “elitist” view of talent and move towards a diffuse talent management model, based on harnessing the potential already present in organisations, with the participation of ISMO: Italian consulting and training company based in Milan, active for over 50 years in human resources development, HR consulting, change management and research.
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The full presentation of the event with additional notes from our experts
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On 21 April, a new appointment of Alveria Talks, the webinar series dedicated to the evolution of HR systems and performance management. The webinar, “From theory to practice: LTIs that really work”, was attended by Filippo Cannavò and BCA Legal, which explored the increasingly strategic role of the Long Term Incentive (LTI) systems, analysing critical issues, regulatory constraints and evolutionary opportunities.
In recent years, Long Term Incentive schemes have assumed a central role in Total Reward policies, especially in regulated contexts such as banking, insurance and listed companies. This growing relevance is the result of two converging pushes: on the one hand, an increasingly complex regulatory framework and stringent; on the other hand, the need for organisations to orient managerial decisions towards sustainable long-term goals.
It is precisely at the intersection of compliance and performance, however, that a structural criticalityMany LTI systems, while formally correct, fail to truly impact organisational behaviour. The webinar explored this tension by proposing an integrated reading that starts from legislation, crosses governance and arrives at the concrete experience of managers, identifying conscious design and digitisation as decisive levers of evolution.
The regulatory perimeter: constraint or design opportunity?
In the supervised sectors, the design of LTI systems is part of a complex regulatory framework, which not only defines the quantitative limits of variable remuneration, but also guides its qualitative principles.
In the banking sector, For example, the regulations impose a strict relationship between fixed and variable components, including in the latter also elements traditionally considered accessory, such as non-competition agreements or exit mechanisms. In this context, non-compliance may entail not only reputational risks, but also the nullity of clauses and sanctions.
In the insurance sector, albeit with greater flexibility, the regulatory framework still directs corporate choices towards similar levels of balance. In listed companies, on the other hand, transparency towards stakeholders and the public formalisation of remuneration policies become indispensable elements.
A clear reading emerges: legislation is not just a constraint, but a real design framework. The challenge for HR functions is to transform these constraints into a coherent system capable of supporting sound, reasoned and defensible decisions.
The hidden fracture: when the system does not speak to managers
In the face of a well-established regulatory framework, a significant gap between LTI systems and their recipients strongly emerges. Many managers perceive these instruments as opaque, complex and difficult to relate to one's everyday actions. The risk is that the incentive loses its orientation function, turning into a deferred pay component, disconnected from actual performance.
This fracture is often the result of a design that prioritises technical correctness and regulatory compliance, neglecting the experiential dimension. KPIs that are difficult to influence, mechanisms that are difficult to read and discontinuous communication contribute to amplifying this gap. Overcoming this limitation requires a paradigm shift: it is not enough to explain complex systems better, but it is necessary to design systems that are, from the outset, understandable, transparent and meaningful to those who use them.
Governance and practice: between formalism and decision-making capacity
Another central issue concerns the governance of incentive schemes. In regulated contexts, the presence of remuneration committees and control functions is well established, but their effectiveness depends on the ability to integrate technical expertise and operational vision.
In the banking sector, governance tends to be highly formalised, with the risk that decisions are driven more by procedural logic than by a real understanding of management dynamics. In other contexts, such as insurance, greater operational maturity can be observed, but the dialogue between compliance and business remains crucial.
Issues such as golden parachutes, the principle of proportionality or the definition of materiality thresholds show how the regulations leave ample room for interpretation. It is precisely in these spaces that the quality of governance is measured: in the ability to motivate, document and support choices, not simply apply rules.
From complexity to clarity: rethinking LTI design
One of the most relevant messages that emerged from the webinar concerned the possibility of simplifying LTI systems without compromising their rigour. Simplification does not imply a reduction of technical complexity, but its reorganisation in a readable key. It means designing KPIs that are clearly linked to managers' decision-making levers, making the interdependencies between individual and corporate results explicit, and building delivery mechanisms that are predictable over time.
In this context, the narrative dimension becomes an integral part of design: An incentive system must be clearly explained in order to be understood and thus acted upon. An LTI that cannot be explained will hardly be effective.
The enabling role of technology
The increasing complexity of LTI systems makes effective management based on traditional tools increasingly difficult. In this scenario, technology emerges as a key enabling factor.
Digitisation makes it possible to ensure regulatory compliance, manage multiannual splitting, track operations for audit purposes and make information accessible to beneficiaries. Particularly relevant is the ability to clearly visualise the relationships between KPIs, performance and reward over time. This transparency directly contributes to enhancing the engagement of managers, making the system more understandable and effective.
It is precisely in this context that a HCMS evolved can make all the difference. In fact, an integrated platform makes it possible to translate regulatory and design complexity into structured processes, coherent and easily governed, reducing the risk of errors while ensuring full traceability. Through advanced features for configuring incentive plans, scenario simulation and continuous performance monitoring, the’HCMS allows HR functions to move from reactive to proactive and data-driven management. At the same time, it offers managers a’clear and accessible experience, making objectives, results and potential rewards visible throughout the life cycle of the plan. In addition, the platform flexibility allows LTI systems to quickly adapt to regulatory and organisational changes, maintaining consistency between policy, execution and communication.
In this sense, the’HCMS is not just an operational tool, but a real strategic enabler, capable of connecting governance, design and user experience in a single ecosystem.
Towards a new generation of LTIs
The outlined picture shows an ongoing transformation: LTI systems are evolving from predominantly formal tools to strategic levers capable of guiding behaviour and sustaining performance over the long term.
This evolution requires an integrated approach that holds together three fundamental dimensions:
- regulatory soundness and governance capacity
- the quality of technical design
- the concrete experience of managers
It is in the balance between these elements that the effectiveness of incentive systems is at stake, a balance that requires systemic vision and orchestration skills on the part of the HR functions. Rethinking LTIs today means going beyond the logic of mere compliance and questioning their real capacity to generate value. The challenge is not to build systems that are perfect on paper, but systems that work in practice: capable of translating long-term goals into everyday behaviour, of making the link between action and result visible, and of being perceived by managers as guidance tools, not constraints. In this scenario, HR functions are called upon to play an increasingly strategic role: not just guarantors of compliance, but real architects of incentive experiences, capable of connecting rules, technology and people.
Upcoming Alveria Talks
The next webinar, scheduled for 14 Mayo, will be dedicated to the topic of Talent Management. The meeting, entitled “Rethinking Talent: how to unleash the potential diffused in organisations ”, will explore how to overcome an “elitist” view of talent and move towards a diffuse talent management model, based on harnessing the potential already present in organisations, with the participation of ISMO: Italian consulting and training company based in Milan, active for over 50 years in human resources development, HR consulting, change management and research.