Saturday, June 14, 2008

Compensation, Management, Motivation (Again)

You are Paid, Managed, Motivated by:
  • Results
  • Future Results
Obviously, nobody has a perfect handle on future results. Mistakes will be made. The principal is:
  • Salary
  • Other forms of compensation and motivation - all you have is Trust and Commitment - the watchwords are "Avoid Violating Trust and Commitment" - so under-promise and over-deliver.
If you risk losing people because you under-promise, then raise the salary, or raise the committed monies to make sure the commitment is delivered. Because if you have a Violation of Trust and Commitment, then you wipe away all the good will built up before, and you will have to deliver double in the future to get half of the good will. People are very slow to forget a Violation of Trust and Commitment. OK, lets go over this list again - these are the components of Compensation, Management, and Motivation:
  1. Results - 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
  7. Relevant Sub-Categories of Market: "inter-market based compensation" - If the whole market sub-category goes down, but inside that sub-category, market share and profitability goes up, the compensation should reflect that. You will be in a good position when the sub-category reverses the downward turn, compensation, today, should reflect that, or you risk losing good people.

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