(This is a business case study. It will be used to guide discussions during the session: “Compensation and Incentives” at the Vendo Partner Conference in Barcelona on Wednesday, September 6th.)
Christian was confused and a little worried. He sat alone in his conference room after a long day of performance and compensation reviews. He hadn’t felt this alone in a while. Usually, he felt a strong connection with his team. They often came together around this oval table to plan, to solve problems, to celebrate victories. Not today.
He had not expected his day to end this way. His top salesperson had just quit after receiving a glowing performance review and a big, fat commission check. Christian had thought that the salesperson would be even more motivated to continue selling like a maniac. The team loved the salesperson. The company loved the results. What went wrong?
Christian pulled out his notebook and his pen and started to organize his thoughts. What had he learned in his 20+ years of creating compensation and incentive plans for teams around the world? What he wrote surprised him.
Christian is from northern Europe. He’s an entrepreneur and primarily motivated by money. What he found as he wrote about his history with comp plans is that not everyone is like him.
He thought about the team that cared more about free lunch each day at the office than a raise in salary. Then, there was the guy who just wanted to be at home, working alone, in his basement. No reasonable amount of money would get him out. He did his best work there, anyway, so both he and Christian were happy.
There were the high-level employees who cared more about freedom than cash. They wanted to manage their own time and their projects. That was more important than raises in salary. Other high-level people wanted firm financial targets to reach. That motivated them to do their best work.
He remembered frustrating communication problems. He reflected on the high-level employee who made a lot of money through quarterly bonuses when the company was in a growth phase. Then the company leveled off and was not hitting growth targets. Quarter after quarter went by without the employee receiving his bonus. After a year the employee was confused and upset because he didn’t get his bonus. The employee hadn’t understood that the bonus was tied to the company’s performance and not the individuals.
Christian remembered the bonuses that were so well received in the beginning. They soon became expected, taken for granted, by employees. Even when the company or individual didn’t hit the targets the employees still expected a bonus. When he didn’t pay a bonus his employees felt like their salaries were being taken away.
As Christian looked down at his piece of paper he saw there were no easy answers. He had tried a lot of good ideas and they had failed. It looked like the path forward was highly individualized packages that take into account the unique needs of each person and the company’s goals. But how can he do that at scale?
- What has been your experience with compensation?
- How do you customize for employees?
- What has worked and what has failed?