Thursday, May 29, 2008

Components of Compensation and Management

Thinking more last night about components of compensation and management (and motivation). There is Intrinsic and External motivation. You need a mixture of both. Men are judged by their salary compared to their brother-in-law, but, also, money alone cannot effectively motivate. A healthy percentage of motivation has to be intrinsic (the problem with intrinsic motivation is that it can be irreparably damaged by a violation of trust (I will write more about this some other time). (How the heck does Intrinsic and External motivation relate to below? Beat me. Still puzzling it out.) Anyway, I remembered that I should add "Market Forces" to the compensation and management factors. Exact components of compensation and management you would desire.
  1. Historical evidence of meeting objectives: like bookings of a salesman
  2. Data on activities that have a "causal" relationship to the desired objectives: like number of meetings and follow-up activities with decision makers
  3. Data on activities that have a presumed, perhaps tenuous causal relationship to the desired objectives: like hours spent researching a possible new product offering. There is a significant chance of complete failure with a new product offering - that is why the causal relationship to the desired objectives is tenuous.
  4. "Positive" human factors: I sometimes eat at a cafeteria salad restaurant. The cafeteria trays are handed out by a handicapped man. Part of his salary is due to the restaurant living its stated values. (But it isn't all "altruism", he brings value, he is the voice of the restaurant's handicapped patrons). Note - What isn't a "positive" human factor - keeping someone in a job because you feel sorry for them is not a "positive" human factor - it has everything to do with a manager who finds it easy to be generous with other peoples' money, who cannot deal with the anxiety of terminating someone for cause, and who would not hesitate to terminate that person during an economic downturn, which is the exact time they would find it hardest to find a new job.
  5. "Negative" human factors: the percentage of salary that is based on kissing up, is another example.
  6. Market Forces: if the work is directly or closely aligned with pricing in an economic market, a component of compensation/management should be based on the market price: like a "free-agent" in baseball, or upper management in a publicly traded company, some component of compensation/management has to be based on the market price

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