I interviewed an executive this afternoon and he had a few great soundbites that I thought I’d share on the blog:
“Once when I was at HP, I met with Dave Packard. I asked him if he wanted me to tell him what the members of my team did. He said no, tell me how you measure them, and then I’ll tell you what they do.”
While I love the quote and point it makes, I don’t agree with it 100%. My general belief is that managers, with all the best intentions, over-engineer compensation plans to the point where no one actually understands what’s going on and the quarterly bonus becomes more of lottery / random-number-generator than anything else.
My favorite quote in this department comes from Business Objects where an EA once famously quipped about our customer loyalty indicator (CLI) bonus program (which put 3% of every employee’s compensation on a quarterly customer satisfaction survey):
“With my CLI bonus this quarter, I can buy one shoe.”
$60K x 3% = $1,800/ 4 = $450 x perf-factor = $400 which after tax = $225. OK, she liked nice shoes, but you get the point.
Even more famously the whole program was later determined to be statistically invalid. The movements on which we were paying people were random fluctuations within the 90% confidence interval. The program truly was: let’s take 3% of everyone’s pay and say, “c’mon seven!”
The great exception to all this is sales compensation, but we won’t jump into that here. But, speaking of compensation, the candidate had another great quote:
I’m never sure which folks are going to listen to my direction and which won’t, but I only have paychecks available for those who do.
Business is, after all, a hierarchy. I’m a huge fan of The Wisdom of Crowds and leveraging groups to improve decisions. But, in the end, it’s not about consensus, it’s about making decisions and being accountable for them. Ownership of the consequences legitimizes decision-making authority.
The last quote was about teaching a new pre-sales engineer that he really was in sales. Sometimes pre-sales engineers have a stigma about sales and treat their sales counterparts like zero-value-added, used-car hustlers.
I took the young man, put my arm around him, and we walked out of the building. I told him to read what it said on the door. He said, “HP.” I said, “no, below that.” He said, “Western Regional Sales Office.”
I told him that he had great talent and that I would happily help him find a job anywhere else in the company. But I didn’t want him to walk back through that door unless he understood that it said “sales” on it.