Winning the Talent War #5: Every Manager Must Be a Compensation Officer

The key lies in creating a culture in which managers are all about rewarding performance.

Years ago, Gary made all of his front-line managers into de facto compensation officers, and it worked like a charm. Gary is the founder of a successful exercise equipment maker. He grew the company from six employees and one product to more than 100 employees producing a steady stream of more than 60 different exercise machines (that’s less than two workers per product in the marketplace!).

How did Gary get so much work done? Well, part of the answer is that they developed a brilliantly simple and efficient manufacturing process, but the real answer is to be found in human productivity driven by rewards.

The first thing Gary did was to make sure that working for his company would be the best-paying job available to his potential workforce. Gary explains, “We only did business in rural towns where people really wanted to live, but wages tended to be lower on average. The goal was that working for us would be the best gig in town. It always was.” Anybody working for this company had a lot to lose simply because the job paid so well compared to other opportunities.

But Gary’s real innovation was in creating a culture in which managers were all about rewarding performance. “I really believe in spot bonuses,” Gary says. “Every supervisor had authority to give bonuses to high performers, anywhere from a few hours pay to a week’s pay. We had a regular supervisors’ meeting, and I would go around the table and ask the supervisors, ‘How many people did you give a bonus to last week?’ If they hadn’t given anybody a bonus, I’d say to them, ‘Do you mean to tell me that you are managing 40 people every week, and you couldn’t find any reason to give somebody a bonus? What is the matter with you?’ So you know those guys were always looking for reasons to give the guys on their crew spot bonuses.” And you can be sure that the guys on the crew were doing back-flips to be the ones who would earn those bonuses. It worked. Gary reports, “In any given year, we were out-producing every other company in the industry with half the number of factory workers.”

A Matter of a Little Negotiation

When managers become de facto compensation officers, productivity explodes. Of course, not every CEO is on board like Gary. So managers sometimes have to go out on a limb and appoint themselves to the compensation team, if you know what I mean. But you don’t always have to do this covertly. Instead, you could do it like Kambiz. Faced with insufficient rewards to motivate his team, Kambiz went to senior management and negotiated for the necessary resources.

Kambiz was leading an engineering development team. After a quick feasibility study, he proposed a revolutionary approach that would change the landscape of the marketplace and put his company’s competition on the ropes. He knew full well that speed to market of the new technology would be everything with this project, as with most high-tech projects.

“To focus the whole team on the time schedules,” says Kambiz, “I requested a bonus scheme that included everyone involved with the product, from marketing to test and product engineer.” After some serious lobbying, top management agreed to the bonus scheme, but they added a clause that every week of delay on the transfer to production would mean a 10 percent reduction in the proposed bonus. That was fine with Kambiz, but if the market value of time on this project was 10 percent of the bonus per week, he figured, then for every week the team came in ahead of schedule, that market value also should be reflected in the deal. So Kambiz cajoled the top management until they agreed to match the potential 10 percent per week bonus reductions on the late side of the deal with 10 percent per week increases on the early side. What do you think happened?

Kambiz continues, “The project transferred to production eight weeks ahead of schedule to the delight of all those involved.” Did you hear that? Eight weeks ahead of schedule. Speed to market was worth a fortune to the company. And it was worth an 80 percent premium on the bonus for every member of the team. “Having seen the results, management was keen for me to educate others to use the same techniques in carrying through projects. Soon after, I was given my own section with five engineers, but I quickly expanded it to 15 by using seven external engineers.”

To Kambiz, it didn’t matter whether his engineers were internal or external, he treated them all like independent contractors, with short-term pay for performance agreements on every project. When necessary, he negotiated with senior management for institutional support. He since has applied his “record time” approach to project completion with every team in every company smart enough to hire him.

Another Case Study

Here’s one more case study: An architect, Mark, tells this story from his days at a major architectural firm in New York City: A well-known clothing retail chain retained the firm to create plans for a four-story limestone building in Chicago to house one of the company’s largest retail stores, as well as a restaurant, salon and spa. The project already had gone through two other architectural firms over the course of two years and the firm was given four months to complete a 10-month job. The client knew just how to do business with its vendor—it offered the firm a huge cash premium and said, “Just get it done.”

The only problem is there was no way this guy was going to complete the job on time… at least not alone. What was he going to do? Hire five subcontractors to help him, that’s what. He negotiated with his firm to get more money in his bonus pool, and then he split it up among the team. “We worked like dogs,” he recalls. “About half the nights we worked straight until midnight, 1 and even 2 o’clock in the morning to get the work done.” Without those bonuses, he insists, none of the people on that team would have been “so dedicated,” and they never would have met the deadlines.

Bruce Tulgan is an adviser to business leaders all over the world and a keynote speaker and seminar leader. He is the founder and CEO of RainmakerThinking, Inc., a management research and training firm, as well as RainmakerThinking.Training, an online training company. Tulgan is the best-selling author of numerous books, including “Not Everyone Gets a Trophy” (revised and updated, 2016), “Bridging the Soft Skills Gap” (2015), “The 27 Challenges Managers Face” (2014), and “It’s Okay to be the Boss” (revised and updated, 2014). He has written for The New York Times, the Harvard Business Review, HR Magazine, Training magazine, and the Huffington Post. Tulgan can be reached by e-mail at brucet@rainmakerthinking.com; followed on Twitter @BruceTulgan; or via his Website, www.rainmakerthinking.com.

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