Leadership Done Right

Brandon W. Jones

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Compensation

Know When To Jump Ship

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In today’s poor economic climate, many companies are doing all they can to stay afloat. Companies are looking for a leader with a vision. They want a leader to take them from a survival state to a strong and vibrant state where they flourish.

Leaders that can do this are in high demand. Struggling companies are trying to attract these leaders away from their existing companies. In addition to struggling companies, some successful companies are trying to upgrade with a new leader to stay ahead of the competition.

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Knowing when to Jump Ship

As a leader, how do you know how long to stay with your current company when other companies are trying to get you to join them? When should you jump ship? When you are in a poor environment it is easy to leave your current company for a better one, but when you are in a good environment, the decision is a little tougher. The following factors should be considered prior to leaving your current company:

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Should Leaders Be Paid Based On Performance?

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During the last few months, there have been a number of articles in the news about leaders and their compensation. In March, I did a post about an article that showed statistics stating that CEO compensation increase for new CEOs had only increased by 1.5% in 2011 compared to 11% in 2010. This was significantly down from past years even though their performance had improved and the performance of the company had improved.

I did a post about Carmelo Anthony because he was paid a high salary to help the New York Knicks become a top team and win a championship. The organization has not been as successful as expected since he joined the team and they have paid him a very high salary for results.

Once again there was an article in the news about compensation and performance. The Wall Street Journal article CEOs That Delivered The Most And Least Bang For The Buck by Joann S. Lublin and Dana Mattioli stated, “A Wall Street Journal analysis of compensation data for 300 top U.S. companies assembled by Hay Group found that while pay generally tracked performance last year, some CEOs delivered far more bang for the buck when it came to shareholder returns.”

The article went on to explain that although the results discussed in the March article showed that in many cases the compensation during the last year was equilivalent to performance, there were also companies that didn’t follow suit with compensation based on performance. The article explained the stories of four CEOs that were significantly underpaid or overpaid.  The graphic above shows some of the statistics related to the performance and compensation based on the CEO.

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Maintain Employee Morale Through Consistency

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Have you seen companies that struggle where the CEO still gets a huge bonus? What does that do to employee morale?  Is it fair for the leader to get a bonus when the company is struggling? Think about what you do as the leader and how that effects employee morale.

Do you take all the credit for the work of your employees? Do you give yourself the pay increase when your employees do all the work?  When you determine how you compensate your employees and yourself, pay close attention to how your employees and outsiders will perceive your actions.

Maintain Employee Morale Through Consistency

CEO’s During the Recession

There were a number of companies during the first few years of the recession where the CEO’s and other top management received huge bonuses while their employees suffered, and at times were even laid off. This treatment had a major negative impact on the employee morale at those companies. Employees felt their leaders didn’t care about them. They also felt the leader was in it to get as much money as possible without concern for their employees or the company.

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Sins of Commission

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From the case study Sins of Commission, it is very evident that the correct compensation system is extremely important to the success of an organization. The case reviewed several instances where the compensation packages in use were set up to put a quick fix in place for a failed system.

Sins of Commission

Sins of Commission

The compensation system is extremely important because it is one of the main drivers for obtaining and keeping qualified employees. It cannot be the sole source of satisfaction for the employees, but it must function properly to serve the benefit of the system as a whole.

The compensation system will train the employees what is valued by the company. When a company drives for customer satisfaction, but compensates based on the number of sales of the individual employee, the employee will do whatever he or she can to obtain the sale.

He or she will not be encouraged to spend time with the customers that are just browsing. On the other hand, in order for the company to obtain customer satisfaction, they must create a system that values customer satisfaction. The system must reward the employees based on the customer satisfaction ratings.

Teamwork Systems

The companies must also set up a system that promotes teamwork within the organization. In the systems where the employees are rewarded based on their individual efforts and not as a team, the group loses unity and becomes several individuals with their own interests at stake.

In order for a company to reach its maximum level of success, all the individuals must work as a team. This must be promoted by team awards rather than individual awards.

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Compensation and Performance Review at Arrow Electronics

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In the case study, “Compensation and Performance Review at Arrow Electronics,” the performance review and compensation systems at Arrow Electronics were broken. There are two specific aspects of the system that are broken: the employees are rated on a bell curve type system for their evaluations and the compensation system for the sales force isn’t competitive for the market.

Compensation and Performance Review at Arrow Electronics

Performance Review System

First, the CEO, Steve Kaufman, has required that the employees are rated on a bell curve type system for their evaluations. Since the evaluation system is set up as a bell curve, the supervisors and managers must always be comparing their employees against each other. Once the employees realize that they are being compared against each other, they will stop working as a team and begin competing against each other rather than viewing the group as a team that works together. [Read more…] about Compensation and Performance Review at Arrow Electronics

SAS Institute

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SAS Institute is a good example of how to run an organization effectively and smoothly. They were quite different from their competitors in several ways. They were very different in the way that they did their outsourcing, recruiting, compensation, and benefits. They set up a system helped the employees to work effectively and efficiently. The system wasn’t too stringent on the employees. It gave them freedom to set their own schedules.

SAS Institute

SAS Institute

SAS Institute did very little outsourcing which helped to provide more opportunities for new employees within the company. By avoiding outsourcing, they were able to retain more control over every aspect of the work that they did. Temporarily it is fine to avoid outsourcing, but in the long run it becomes very expensive to do all processes in house. They could also run into problems with entering markets that are unrelated to their core processes. [Read more…] about SAS Institute