Every CEO wrestles with the compensation issue. How do you motivate employees to succeed? How do you meet the expectations of the labor market? How do you create a sustainable business plan and culture?
When I purchased the firm from my father, the very first day I implemented a shared fate program. I identified our historical earnings and I said that for every dollar over that we earn, we’re going to share a portion of that with every employee in the firm from the receptionists on up.
I wanted a very formulaic approach, where each person would earn an amount based on their roles’ ability to influence the profits of the company. The team wanted a discretionary portion so, I as CEO, could give extra to certain people based on my judgment. I resisted that because I felt it would dilute the purpose of the shared fate plan.
Why Didn’t I Want to Be in Control of Bonuses?
There is actually research out showing that sometimes the more you pay someone, the less well they work (Daniel Pink’s “Drive“). That is, for tasks that require some kind of creative engagement, where the worker is not just following a set of instructions over and over, a sense of pride and accomplishment is really the best motivation. You get the best results by paying enough that your employees don’t have to worry about finances and then stepping back and let them work. If you pay large bonuses and make it about the money, that creative engagement turns off.
Of course, there is a conflict here because you have to keep compensation competitive for your industry or you won’t attract the talent you need. But the point is it is ultimately a sense of meaning and purpose that motivates people to do their best work.
We shared our earnings in order to give everyone in the company an investment in the future of the firm. I was extremely invested because I had essentially mortgaged my family’s future in order to make that business work and I couldn’t do it alone. I needed the rest of my team to be invested too.
The shared fate program wasn’t so much about giving people extra money for better performances. Instead it was a tool to give everyone a sense of ownership in the outcome of their work and to foster that creative engagement I was talking about.
Two other unique things we did to attract the best of the best—we gave our people ownership of the deliverable and ownership of our culture.
What Is Ownership of the Deliverable?
Most companies are what I like to call benevolent dictatorships, where directives come down from on high and everyone just does as they’re told. I don’t think that 1950’s style of management is going to work for much longer because it doesn’t give people a sense of control over the outcome of their work. It doesn’t provide that sense of meaning that you need for creative buy-in.
Today I think we need to look to our team members for ideas, not just to the leadership at the top. Now there are a lot of different ways to get those conversations happening, but the key takeaway here is that when an individual joins your organization they have to be able to influence what they’re doing and how they’re doing it. You have to give them the best possible tools and allow them to apply those tools in the best possible way to meet the needs of their customers. You don’t want to treat your employees like puppets.
What is Ownership of the Culture?
Ownership of culture is the ability of individuals to change how things happen within the organization. As CEOs, we’re really managers of change. Some CEOs embrace change, others resist it. For some, letting other people change the organization is part of that sheer terror zone I wrote about earlier.
The Bottom Line
The benefit of a compensation program that isn’t just based on money but is also based on shared ownership of the deliverable and of the culture creates a desirable place to work. When the word got out that we had a fair work environment that empowered the team to achieve their best and to contribute individually, we found that people from our competitors—the best of the best of our industry—started to seek us out as the place where they wanted to spend their career.