Compensation Revisited

Not unlike a car wreck on the other side of the highway, I can’t stop myself from slowing down just a little and gawking at the latest “better motivations than money for your employees” article.  And it’s not that I don’t believe any of that, but somehow the articles never quite nail the real question in my mind.   Here’s the latest list of things you can do instead of paying your employees more money:

1. Be generous with praise
2. Get rid of the managers
3. Make your ideas theirs
4. Never criticize or correct
5. Make everyone a leader
6. Take an employee to lunch every week
7. Give recognition and small rewards
8. Throw company parties
9. Share the rewards and the pain

Although it might be great sport, I am not even going to pick at each recommendation.  Each could be be useful at times, though I would be reluctant to universally apply any of them.  I am also going to restrain from pointing out the obvious conundrum between #2 and #5 (oops, I guess I just did… dang.)

I do want to offer one constructive thought, since we are all banned from criticizing or correcting by #4.

Compensation and motivation/morale are two vastly different things.

If you don’t believe me, find a company that has the highest morale and the most motivated employees you’ve ever seen.   Then have the CEO announce that the company is bankrupt and that anyone who wants to stay and work for free can do so starting Monday.  I am not saying no one would show up, but I doubt it’d be business as usual.

Most employees need to work to live, sustain their families, and otherwise pursue their personal version of the American Dream.  That’s why the size of their paycheck matters to them.   They also want to feel good about where they work, who they work with, and what they do.   Here’s a news flash though:  the latter is, to a large extent, out of your control as a company leader/exec for two reasons:

1) you can’t possibly predict or control the complex interpersonal relationships that develop in the workplace.

2) in many organizations (though I am sure not yours) there is an innate skepticism from employees around all new management initiatives.  The “real” reason you’re taking me to lunch, throwing a party, or praising me is always lurking in the back of some of your folks’ minds.

And if anyone even mildly suspects that any of these parties, praise or changes is intended to be a “replacement” for a raise or bonus, you will be well on your way to the exact opposite outcome of what you set out to do.

Instead, just try being Fair, Honest, Transparent and Unflappable.   That’s five less things you have to remember to do, and none of them require you to go to the Olive Garden six times a month…

Big Fish, Little Fish, smells the same

Sometimes I worry about running out of things to blog about.   Then I caught a few news stories this week and that fear just melted away…

The first news story I heard, which I am sure many of you did as well, was about the CEO of Nabors Industries, Eugene Isenberg, who stepped down as CEO to remain as only the Chairman of the Board, as I understand it.  For this magnanimous gesture, he was paid a lump sum of $100 million dollars.   Dr. Evil would be proud.

The second got a bit less notoriety, but is eerily similar in many ways except for the size of the payout.   Turkia Mullin was the Chief Development Officer of Wayne County in Michigan.  She left that job to take over as CEO of Detroit Metropolitan Airport, which, no surprise, is in Wayne County.  For this shift in roles, she was paid a “severance” from her CDO job of $200,000.00.   As you can see from the article, once this payment came to light, she announced she would be returning the money.    Which only adds to the innate sense that the payment was completely unjustified in the first place.   Otherwise, you’d think she would have kept it.

I think we can all agree that executive compensation often feels completely out of line with performance, actual responsibilities, value to the company as a whole or other factors.  But it is even more disturbing to me that, now, executives are getting big payouts just to change jobs or titles within THE SAME COMPANY (or county, in Turkia’s case…)

CEO News flash:  Whether you support our current president or not, I think we’d all agree that Barack Obama probably makes more gut-wrenching decisions in a month than either of these folks made in their entire careers, including sending brave young women and men into harm’s way.   If you don’t believe me, do some reading about the marines in Dark Horse battalion.    I am pretty sure Barack’s salary is closer to Turkia’s “bonus” than to Eugene’s base pay, no less his “lump sum” payout.  So whatever contrived justification you CEO’s are creating inside your heads that help you believe you deserve this type of financial compensation for your efforts, I don’t think they have anything to do with leadership.

In the 1800’s, a term was coined for folks like this.  Robber barons.  Might be a good time to revive that catchy little label…

The Chief

Many of you who know me also know I am an unapologetic Steelers fan.  You have been cautioned.  So you would rightly expect a post basking in the glory of decisive wins over the Jets and Ravens to reach Super Bowl XLV (that’s 45…) or a prediction of a Steeler’s VII’th (that’s seventh…) championship.  But you would only be half right.

The New York Times ran a great article today about the Steelers relative success and how it seems attributable to how they run their team like a business.  Here’s the article.  What struck me, and what I hope will strike you, is how many of the  strategies they apply to run a professional sports franchise are applicable to any business that cares about its employees.  And how some of Mr. Rooney’s quotes are words for us all to live by, and how his actions back up his words.

Here are a few quick gems: (bolding courtesy of yours truly)

• More than by any player or coach, the Steelers are identified by the way they have done business for 40 years. They build through the draft, take care of their players, maintain financial discipline, eschew flashy hires and treat people well.
• “I’m envious,” the Indianapolis Colts’ owner, Jim Irsay, said. “I’ve spent more than $100 million more than those guys in the last 10 years.” He added, “How can you accomplish so much with such a disciplined business model?”
• Two weeks ago, when Dan Rooney, now the United States ambassador to Ireland, returned to Pittsburgh for the A.F.C. championship game, he spoke to a handful of reporters about the N.F.L.’s labor strife. During that conversation he offered a bombshell of a quote that summed up the Steelers’ ability to take the long view of success.
• “I’d rather not have the money,” Rooney said about the proposed 18-game regular season.
• The remark also resonated in the Steelers’ locker room, where stories about the Rooneys’ unusual affinity for the people who work for them are limitless. They shake the hands of each player after games, win or lose. They offer advice to new players on where to send their children to school. They take the men and women who work in the cafeteria at the team’s training facility to the Super Bowl.
• “He’s talking about he’d rather not have the money,” Steelers linebacker James Harrison said. “He’s truly concerned about the players. Other owners that are willing to go ahead and say give us 18 games don’t really care about the safety of players. They care about making money.”

The Chief, by the way, is Art Rooney I, the first owner of the Steelers.  The current owner, his grandson, is not a spoiled rich kid; he’s a proud man carrying on a proud legacy – still treating “employees” right.

I think the Rooney’s are one of the best examples that success, loyalty, and treating people right do not have to all be mutually exclusive.

I would hope that even a few Packers fans can agree on that…

The Department of S&E

One of the things I thought was cool about 2001 A Space Odyssey was the name of the computer, HAL.  Being the not-so-intuitive type, someone had to clue me in that HAL was IBM, just one letter each toward the front of the alphabet – H instead of I, A instead of B, you get it…  (side note – Arthur C. Clarke, the author of 2001, A Space Odyssey, denies this and claims it represents Heuristic ALgorithm…)

Did you also know that the budgets for Research and Development for IBM, Microsoft and Intel are, respectively, $6 billion, $9.5 billion, and $6.5 billion?  Even recognizing that new products and technology are the lifeblood of those companies, that is still some serious cash to throw at one department, relying on them to come up with the next big thing.

  What about the rest of the folks at IBM, Microsoft, and Intel?  What is the budget for them to innovate?  I fear it may be $175.89.  That’s the cost to purchase and mount 6 or 7  “suggestion boxes” in the cafeteria, lobbies and break rooms.

I wonder how all the employees who aren’t part of R&D feel about all that.  And not just at IBM, Intel and Microsoft.  They are just easy targets because their budgets for R&D are so mammoth.  What about your company’s R&D budget?  How much is it and where does it go?

I have to believe that teams that work with their company’s products and technology have an amazing number of ideas for how to improve them or how to create brand new ones.  But I worry that many of the employees who aren’t in R&D are, perhaps inadvertently, being messaged that they are in S&E, Stagnation and Entrenchment.  And I have seen this!  Employees seem all too comfortable to work very hard at keeping things just the way they are (stagnation) and avoiding new tasks, responsibilities and challenges (entrenchment).

It’s easy to think that’s the employees’ fault, right?  I mean, they’re jaded, what are you gonna do? 

Why not take a little of that R&D budget and give it to the S&E teams?  Give them a serious incentive to innovate and improve your products and services.  Give them the opportunity to become an extended and welcomed arm of R&D.

Or, just learn how to hum Daisy Bell…

Retention Bandaids

How many companies or organizations do you know of that proudly state, “Our people are our most important asset” every chance they get? Quite a few, I bet. How many of them genuinely behave that way? If you’ve traveled some of the same roads I have, you may find the answer to be “not many…”

Why is that? Do you think that company executives don’t believe that statement at all? Do you think they have another asset hidden away somewhere that they don’t talk about that really is more important? I don’t. I think most executives really believe their people are their most important asset. They just don’t know how to put that belief into practice.

This is a perfect example of Peter Senge’s fifth discipline, Systems Thinking, not being put into action. To effectively treat your employees in a way that convinces them how valued they are (because remember, it’s THEIR perception, not YOURS, that matters…) you have to delve into root cause and effect relationships. Many executives are afraid to do that, because:

a.  They will hear things they would rather not hear.
b.  They believe all root causes will come down to compensation and they are certain they can’t afford or justify that level of investment, so what’s the point?

The reality is not actually that scary once you set your ego aside. My experience, along with many conversations I’ve had with extremely valuable employees, tells me that you can go a long way toward creating that belief system by doing the following:

• At reasonable intervals, invest in something that clearly ONLY benefits employees.
  and not the business as a whole or the management team. That could be an investment in equipment or facilities targeted toward a common gripe that employees have (uncomfortable office furniture, an important missing benefit, or better internet bandwidth perhaps) or free pizza on Fridays. If you are worried you can’t afford a big investment, just about anybody can afford 10 or 15 pizzas and a few liters of coke.

• Make sure there are no implied or subtle strings attached to the gesture.
  I hate to tell you, but when you buy pizza for people who work late, they don’t think you’re being caring, they think you’re trying to placate them to avoid paying them overtime.

• Offer employees the opportunity to work in small teams on improvement or morale projects.
  Don’t force them to do it. Don’t make them do it on their own time. And for God’s sake, when they come to you with a few suggestions, make sure you implement at least one, even if you don’t agree with it.

• Be intensely and acutely aware of hypocrisy.
  Your employees already are. It’s understood and accepted that some ‘perks’ come with being a leader in an organization; a bigger office, maybe mileage reimbursements, and perhaps more latitude with expense accounts, etc. But there’s a fine line between that and inadvertently creating a ‘caste system’ that will unintentionally create a gulf between you and your staff. When you’re about to do something that benefits just management, just you, or just the business, ask yourself (or a trusted employee!) how it will be perceived by others.

• OK – here’s the big one.
  If you read carefully, you’ll notice I DIDN’T say that this ISN’T about compensation. I don’t care what all the industrial engineers and HR consultants in the world say about employee motivation, most people I know work to support themselves and their families. An extra ten or fifteen thousand dollars a year DOES matter. They won’t compromise their ethics, their spare time, or work in an unbearable environment for a few extra bucks, but they sure as heck will go work at one of your competitors if they think that everything else is more or less equal.

So here’s what happens. Your best folks are constantly being solicited by competitors or other organizations. You can pretend (see bullet a above) that isn’t happening, or you can acknowledge it and deal with it.

Here’s how ineffective leaders deal with it – they wait til one of their best people gets an offer from a competitor. In a panic they decide whether to make a “counter offer.” For a while, due to inertia and instant gratification, that might work (nice bandaid!) but what you’ve really said to the employee is, “I was underpaying you for as long as I could and hoping you wouldn’t try to find out what you’re really worth on the open market. Now that you know, I’ll pay you a competitive wage… won’t you please stay with us? We love you.”

So what is the alternative to the last bullet?

At a minimum, have quarterly market-based compensation discussions in groups with your employees. Ask them what they are hearing “on the street” about what certain roles in your geography are being paid. Be certain that similarly experienced and capable employees are roughly in the same compensation range. Be ready to make adjustments if you find a glaring inequity. Do it over time if you have to.

You’d be surprised at how patient employees can be if they think you are genuinely trying to right an injustice. Your reward for this will be that you won’t have to tell anyone that your employees are your most valuable asset ever again. Your employees will tell them…