Compensation Rules

Darren Dahl writes The New Rules of Compensation in the July/August 2009 issue of Inc and talks to four entrepreneurs about changes they made in their employee compensation strategy. The tactics are varied, but the results all point to a better bottom line AND HAPPIER EMPLOYEES!

Go figure. What works? How about:

• Eliminating a 5% premium over competing employers by paying market rates as an alternative to layoffs.
• Changing the commission structure so salespeople earn a bigger commission the less they discount the price.
• Making a fast price change to reflect new market realities, and then restoring a previous pay cut to compensate the team's hard work.
• Using the opportunity to replace B-Team players with A-level performers. "When we replace the B-level performers, it actually elevates morale" says the owner.

Dahl refers to today's economy and it's effect on employee compensation as "unprecedented". Managed carefully, entrepreneurs can lever the circumstances to create win-win opportunities for both themselves and their employees.

Jerkiness and Bad Decisions

Tom Davenport's NEXT BIG THING BLOG on the harvardbusiness.org site has an interesting entry Why Jerks Are Bad Decision-Makers which dives into the correlation between the jerkiness and the bad decision making of executives. Davenport recalls some of the all-star executive a******s and their world-class blunders, including:

• Joe Cassano, CEO of AIG, and Credit Default Swaps for Subprime Mortgages.
  
• Jimmy Caen, CEO of Bear Stearns, and how overconfidence destroyed an 85 year old investment bank.
  
• Dick Fuld, CEO of Lehman Brothers, and how arrogance and personal disrespect may destroyed any hope of a US Treasury bailout for the firm.

Davenport's summary points certainly resonate with the values I hold -- basically, extensions of the "Golden Rule". But his closing line is what gives me pause:

"Jerks often seem to get ahead in firms and advance through the ranks, but that's a dangerous phenomenon. If you want good decisions in your organization, don't hire, promote, or retain jerks."

Dangerous phenomenon? Yeah, I guess the utter destruction of billions of dollars of investor wealth and the near collapse of the world financial system due to personal arrogance, greed, and pettiness could be thought of as beyond risky.

So, why do so many jerks end up hired, promoted, and retained in some of the most powerful positions at the most powerful companies?