Featured Article in the New York Times
As executive bonus announcements are made, the consequences of this deception and betrayal will be felt throughout organizations by employees, customers, and shareholders. One micro (yet compelling) example is the fact that on average an employee works 5.4 hours in an 8 hour day, but during times of change, confusion and perceived inequity, that drops to 45 minutes.
What sets great leaders apart from the thousands whom have been studied is their clear focus on creating a better future and setting such a compelling vision that others cannot help but follow them. American business has prospered largely because of its emphasis on accountability, innovation, and above all, standards of exceptional performance. These ideals are now at risk of being shattered because of leaders rationalizing that their own self-interest should come before those of their real constituencies.
While many directors and compensation committee members cite the potential attrition of great people and talent, if bonuses are not provided. This is neither thoughtful nor based on fact. Research shows that while pay and compensation are important to everyone, intrinsic motivation such as mission, purpose, achievement, and creation of value trumps the dollar. Actually, when order of importance is tabulated, pay is no higher than seventh place in its importance to creating high performance.
In the absence of true performance measures or the lack of courage to hold out for them, we run the risk of rewarding “the weather man for a sunny day.” We do not need wholesale reform, simply a return to the basic principles of performance-based compensation. This means:
- True leaders should look in the mirror and turn back unearned bonuses as a symbol of trustworthiness and commitment to their organizations.
- Directors and governance should boldly establish key success targets first and then determine the bonus structure commensurate to value creation.
- Organizations should eschew “buying growth” and dedicate themselves to “building growth” organically through relentless focus on the customer and the employees who truly engage them.
At the end of the day, however, if you must pay the unearned bonus – do so and quickly show them the door!
An international thought leader in the world of management, Mr. Coffman’s work has been translated in over 40 different languages and cited in more than 110,000 books, articles, and websites regarding leadership, management, employee engagement, and customer loyalty. Mr. Coffman, Senior Partner of The Coffman Organization and co-author of two of the best selling management books of all time, “First Break All The Rules” and “Follow This Path.”
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Archana
