Performance-based equity—particularly in the form of Performance Stock Units (PSUs)—is one of the most powerful tools companies have to align executive leadership with long-term shareholder value. But while plan design and metric calibration are essential, there’s another critical driver that’s often overlooked: strategic communication.
Too many companies wait until the end of the performance period to communicate results. By that point, the opportunity to shape behavior, sustain alignment, and reinforce priorities has passed. And for executives tasked with delivering results, this delayed feedback loop can feel disconnected from day-to-day decision-making.
If you want your PSU program to drive performance—not just compensate for it retroactively—communication must occur throughout the entire performance period. Here’s why it matters.
Anchor Executive Focus Early
Most PSU plans are tied to financial metrics like TSR, EBITDA, or revenue growth. But even at the executive level, assumptions about how performance is measured can vary.
From the moment PSUs are granted, executives should understand:
- Which metrics matter most—and how they’re defined
- Why those measures were chosen over others
- How payout levels align with specific performance outcomes
Early communication ensures executives internalize the connection between strategy, execution, and personal reward. It sets expectations, eliminates ambiguity, and allows leaders to align their teams accordingly.
Sustain Long-Term Engagement Over Multi-Year Cycles
PSUs often span three or more years. In that time, business conditions evolve, leadership changes, and short-term demands compete for attention. Without consistent touchpoints, even a well-designed PSU plan fades into the background.
Companies that treat PSU communication as a quarterly discipline—not a year-end event—keep performance expectations top of mind. Regular touchpoints might include:
- Executive updates in board prep materials
- Performance dashboards showing TSR and peer benchmarks
- Mid-year reviews aligned to strategic milestones
Executives don’t need endless data—they need directional clarity and regular opportunities to adjust course.
Increase Transparency And Reduce The Risk Of Misalignment
PSU plans are complex—especially when they involve relative metrics, modifiers, or market-based outcomes. Without clarity, executives may misunderstand how results are calculated or question the fairness of outcomes.
Mid-cycle communication helps mitigate this by:
- Explaining interim performance against benchmarks
- Outlining adjustments for M&A or divestitures
- Reinforcing the methodology behind payout calculations
This level of transparency builds trust, reduces friction at payout, and reinforces the integrity of the plan.
Provide Strategic Context For Shifting Targets
Executive performance is shaped by external forces—economic conditions, market disruptions, strategic pivots. These forces can change the reality in which PSU goals were originally set.
Proactive communication gives leadership teams the context they need to stay focused and informed. For example:
- If a key acquisition is delayed, explain the impact on TSR projections
- If inflation alters cost structures, outline how targets may be reassessed
This clarity keeps executives aligned with the organization’s evolving definition of success.
Reinforce Culture And Executive Accountability
Even when rewards are delivered at the end of the cycle, recognition doesn’t have to wait. Highlighting key contributions and leadership behaviors along the way reinforces the values that drive results.
Use internal communications to showcase:
- Strategic decisions that moved the company closer to performance targets
- Executives who modeled long-term thinking or cross-functional leadership
- Stories that link performance to culture and mission
In high-performing organizations, PSUs aren’t just incentive tools—they’re narrative drivers that strengthen accountability.
Manage Expectations And Protect Perceived Value
Without clear communication, PSU payouts become a high-stakes surprise. Even strong results can feel disappointing if the process is unclear or if peer group dynamics dilute perceived value.
Regular updates allow executives to:
- Understand the payout trajectory ahead of time
- Absorb rationale for any potential adjustments or cliff structures
- Internalize the payout logic before final results are issued
This improves acceptance, minimizes backlash, and enhances the impact of the plan.
Final Thoughts: Communication Is A Lever—Use It Strategically
PSUs are designed to motivate executives to think long-term and act with purpose. But without timely and transparent communication, even the best-designed plans fall short.
The companies that get this right treat communication as an embedded part of their executive compensation strategy. They don’t just talk at the end—they lead with context, clarity, and credibility throughout the cycle.
If you’re looking to elevate how your organization communicates performance awards, Infinite Equity can help. From performance modeling to strategic messaging frameworks, we’ll help you build a PSU strategy that performs—on paper and in practice. Contact us today.
