Tweet

Compensation and Performance

Guest post by: Karla Robertson

Article Overview: Does compensation really drive top performance? Well we've certainly seen a lot of people being paid a lot of money for not performing so what's up? If you have someone who is the right person for the job and they have shown promising results then it is probably a good investment to up the compensation. But compensating the wrong person is never going to make them the right person for the job. And your results will suffer in 9 different ways. What questions should you be asking yourself as you consider executive compensation approaches?

Compensation and Performance

I recently read something that caught my attention about executive pay and what impact it has on performance. In his article, Claudio Fernandez-Araoz made some compelling comments based on research he provided in his article. One of the summarizing points he made really resonated for me: "... the purpose of compensation in my view and Jim's research is not to "motivate" the right behaviors from the wrong people." Couldn't agree more. If you have the wrong people in key roles whose decisions have a deep impact on the organization, no amount of compensation is going to right that wrong.

How do you first make sure the next person you hire has "the right stuff" before you even think about what to pay them? First and foremost, the final decision-maker and those who will assist in finding and interviewing the candidates must make sure they have a clear and shared sense of what the company's brand is and a vision of where their place is in the market and how this next person is going to contribute to getting there. They also need to have clarity around their expectations in order to be able to recognize the "right" person. What will make for the right fit? What are the non-negotiables surrounding the qualities of the ideal person for the role?

I am reminded of a quote from W. Michael Blumenthal, former Chairman of Unisys: "In choosing people for top positions, you have to try to make sure they have a clear sense of what is right and wrong, a willingness to be truthful, the courage to say what they think is right, even if the politics militate against that. This is the quality that should really be at the top. I was too often impressed by the intelligence and substantive knowledge of an individual and did not always pay enough attention to the question of how honest, courageous and good the individual really was." With the rise of stories in the media of high level executives falling from grace through their failings in the ethical and values-based realms, this quote begins to ring louder as a clarion call to pay more attention to the fabric of who a person in addition to the expertise they bring.

So here are some questions that can help you and your hiring team gain clarity around the criteria that candidates will need to possess to be the right choice for key roles in your company. After you are clear on the right person, the right compensation will follow. Again these questions are just for the team to gain clarity and do not encompass all questions that should be asked during this process.

1. Do we have clarity around what our brand is and our vision of where we need to go? Do we have a clear sense of our current strengths, vulnerabilities and current needs?

2.(If you are replacing someone who previously held the role) What have we learned so far from the previous people who have held this position?

3. Who was successful and why? Who wasn't and why?

4. Do we think the kind of person who we deemed as successful in the past would be successful in the current environment we face? Why or why not?

5. Are there different skills we need in the next person who assumes this role that we haven't needed before due to our current issues, challenges, economic landscape, etc?

6. (If this is a new position never occupied by anyone previously) What gap is left in the senior team that this person should fill?

7. What will make for the best fit?

8. What's the best way to get at how this person thinks? What kind of thinker do we need in this role?

9. What are the most important skills this person must possess?

10. Is there room for improvement in our selection process? How can we do it better than we have in the past?

11. What tools are out there to help us assess whether candidates have these most important factors?

12. What are next steps?

The typical approach is that people tend to put more emphasis and energy on the recruiting and interviewing and don't spend enough time gaining clarity around what exactly this executive needs to possess. What are the key expectations? What are the lessons learned in the past? Additionally, and this is a sobering thought, the hiring team including the HR partners have to ask themselves if their own thinking has been part of why they haven't selected the people with the right stuff in the past. If that hasn't been an issue up to now, could it be going forward? Times change and so people must at least ask themselves if their thinking has to change as well. We all have a hand in what works right and we all have a hand in what doesn't. In order not to replicate bad practices and to reinforce good ones, the first place you need to go is internal. Ask yourself, "How are we thinking about our team, our company, our mission, ourselves?" Where you come out on those answers will help you to answer the question, "Who do we need in this role who will contribute to achieving our mission, leading the company, leading us through change, filling the gap, etc."

Related Articles
  Aligning Compensation and Rewards
  Swim Clear of the Compensation Undertow
  American Execs Think they Deserve to be Paid Less
  Insurance FAQ's
  Compensation Definitions: Basic Must Knows for the Entrepreneur or Employee
  Sales Incentive Plans Drive Sales Behaviours
  Innovative Trends in Non-Profit Executive Compensation
  Sales Force Compensation - X Marks the Spot
  Superstar CEOs Suck
  Cultural Differences with Sales Force Evaluation
  Sales Compensation Guidelines
  Experienced human resources expertise
  Managing Employees Performance
  Science Daily Week: Which is more effective: bonuses or raises?
  Success Involves An Attitude of Service
  Performance Management-How Your Sales Team Can Benefit
  Maximize Your Sales Force
  What the Fair Pay Act Means For Your Business
  Show Me The Money - Network Marketing Compensation Plans Compared
  Developing a Sales Compensation Plan in Tough Times

Article Tags: compensation approaches, executive compensation, job, money, promising results, top performance



Related Forum Posts
HRPreneur - Hi everyone, I am new to the forum and I recently started my own Human Capital (HR) consulting firm called HRPreneur Inc. HRP focuses on making human capital a strategic differentiator for SME's. Below is a summary about HRP; Who We Are: HRP is a Human Capital consulting firm with 30 years of experience that becomes an extension of your company by providing a full array of services to help you create a highly engaged workforce focused on achieving strategic results in order to build a long lasting great company! Mission: HRP provides small and medium sized businesses a Strategic HR Business Partner to increase employee engagement, resulting in cost savings, increased productivity and results at an affordable rate! Vision: To inspire and warrant SME's reach their full competency! Cost Effectiveness: We provide over 30 years of experience at a fraction of the cost at a strategic executive HR business level You will save between 50% to 60% in costs per year on salary, bonus, benefits, training, office space alone We will provide you additional cost efficiencies through our services Services: • Strategic Human Resources Planning • Organizational Redesign • Change Management • Organizational Culture Development • Employee Engagement Programs • Leadership Assessment and Development • Compensation Design • Talent Acquisition • Assimilation and On-Boarding • Performance Management • Talent Management & Succession Planning • Human Resources Due Diligence • Human Resources Audit • Full Service HR Outsourcing
ARTICLE: Performance coaching in the workplace - To create lasting performance change it is necessary to first understand the positive and negative influence that a person’s personal behaviors has on their execution and what impact these have on their ability to achieve success. Only when we fully understand a person’s behavioral patterns and create positive self-managing coaching strategies can we assist a person to create lasting performance change. The vast majority of employers believe coaching can deliver significant benefits to both individuals and organizations. The majority of employers plan to increase the use of coaching over the next few years, according to a new survey by the Institute of Personnel and Development. Nearly nine out of ten interviewed companies expect their managers and supervisors to deliver performance coaching as part of their day-to-day work. In another large industry-wide study it was found that most managers reported that they were confident in their ability to coach. However, the study also showed that the managers’ actual skills levels as coaches were typically poor. As a consequence they were not nearly as effective in their coaching as they believe themselves to be. Often times, they believed that coaching consisted of just providing 1-to-1 instructional feedback to their staff members on what to do in a given situation to perform better. Many recent studies have shown that technical skills only represent at best 20% of the contribution into our performance. The remaining 80% comes from our ability to choose or make a decision, assertiveness, commitment to grow, ability to concentrate, honesty, optimism, persistence, ability to perform well under stress and so on. These traits are commonly called our soft skills or attitude. Few managers understand just how deeply rooted their own behavior patterns are, let alone how to positively change them in other people. Performance coaching is frequently confused with other types of coaching, such as Executive coaching and Life coaching. Performance coaching is a form of Directive coaching. Executive coaching and Life coaching are both forms of Non-directive coaching. Directive coaching is usually more suitable for a manager who sometimes acts as a coach. Performance coaching in the workplace has developed immensely from what it was only 4 years ago. To choose the right coach will make a huge difference. You also better make sure to know what you want. If your coach knows what (s)he is doing – you will get on your way to get it! [i:38tu5pgr]- Peter J Karlsson[/i:38tu5pgr]
Compensating your Advisory Board - Hey! Happy Monday. With regard to stock options, I am of the belief that 1-2% is appropriate historically. Personally, I would be open to considering any amount based on the level of expertise and time they are willing to give me. Although I did have one gentleman ask for 20%. I told him no. I have 7 members on my advisory board currently and I am starting to build one for my women's leadership business. I have thought about adding it to the existing 'agenda' but I need different skills and resources. Compensation varies and is kept very confidential at our board. Everyone knows they have 'skin' in the game per say, and I am very careful not to abuse that trust. For one thing, sometimes I find myself thinking that a more formally 'paid' member should be doing more legwork....that kind of stuff. Its a bit challenging but so far the dynamics work.
These maybe the coldest franchises out there: - Here are the worst 15 performing franchises in regards to having the highest Small Business Administration (SBA) loan failure rates. The list is dotted with sub sandwich shops, fitness centers and car shops. WORST FRANCHISE LOAN FAILURES Failure % 1 OBEE'S SOUP SALAD SUBS 55.56% 2 LADY OF AMERICA 41.94% 3 COUNTRY CLUTTER (BED & BREAKFAST) 41.18% 4 COPY CLUB 36.36% 5 ALL TUNE AND LUBE 35.71% 6 PICKERMAN'S 35.71% 7 PHILLY CONNECTION 35.59% 8 ROLY POLY ROLLED SANDWICHES 34.78% 9 COTTMAN TRANSMISSION 34.48% 10 HAIR COLOR EXPRESS 33.33% 11 LEE MYLES AUTOMOTIVE TRANSMISSIONS 33.33% 12 GODFATHER'S PIZZA 33.33% 13 SMOOTHIE FACTORY 33.33% 14 BLIMPIE 31.39% 15 GOLF U.S.A. (RETAIL GOLF EQUIP.) 30.77% Source: Small Business Administration, SBA Loan Performance Within Franchise Code for the Period of FY 2001 - 2005
Success Strategies - How to get the results you want now? Success Strategies and Action Steps I have used are: The Power of Choice Where you are at this present moment, is exactly perfect from the choices you have made. If you want to be somewhere else, you have to decide clearly what that is (your goal/outcome) and create action steps to achieve this. The Power of Focus The book "The Power of Focus" by Jack Canfield, Mark Victor Hansen and Les Hewitt, is one of my treasures in my Entrepreneur Library. If you focus on what you want versus what you do not want, your conscious and sub-conscious mind will direct attention to this. The movie, What the Bleep, Down the Rabbit Hole, explains this in detail about quantum physics and what we create in our lives. The Power of Commitment This is not about commitment to others. The first step is the commitment, your word, you make to yourself. Accountability and responsibility are additional success strategies and ingredients to creating the success, defined by you, that you want. The commitment to others reflects your integrity, your word and the team you work with. Co-workers, clients, yoru family, friends and community. My Success Acronyn in Success Breakthroughs(c) is: S pecific & self-directed U nlimited opportunities & possibilities C reate powerful outcomes C onsistent measureable results E xperience pwoerful transformation S olution and action-oriented S uccessful habits and outcomes Break Through to Powerful LIfestyle & Performance Choices Moira


Share this article with your friends. Fund someone's dream.

Leave a comment below or share on the left and you'll help support entrepreneurs in Africa through our partnership with Kiva. Over $50,000 raised and counting - Please keep sharing! Learn more.

Newsletter

Get advice & tips from famous business
owners, new articles by entrepreneur
experts, my latest website updates, &
special sneak peaks at what's to come!

Name:
Email:

Popular Articles

Purchasing Real Estate using the SBA 504 Loan

3 Competencies of Leadership

Rumor Has It

Suggestions

Email us your ideas on how to make our
website more valuable! Thank you Sharon
from Toronto Salsa Lessons / Classes for
your suggestions to make the newsletter
look like the website and profile younger
entrepreneurs like Jennifer Lopez.