An Olympic Lesson in Compensation Alignment

The 2012 Olympic Games are over.  It was an inspiring 17 days, filled with accomplishment and emotion.  It was also filled with great lessons on Strategy Execution, including one of the best on Aligning Compensation and how the right compensation model drives desired behaviors. 

Think about the medals.  Is there any better example of an aligned compensation model than a gold medal?  It’s so very simple: If one performs better than one’s peers, one earns a medal (and the others don’t!).

Lesson One:            Keep it simple

Even in the most complicated of sports, like decathlon or gymnastics, the medal-based compensation model didn’t change. Yet the behaviors sure did!  You didn’t see Missy Franklin practicing the shot put, Gabby Douglas kayaking, or Ashton Eaton on the balance beam.  But why?  Each of those behaviors earned someone a gold medal.  The answer, of course, is to align compensation that drive behaviors relevant and important to each individual’s responsibilities.

The key is clarity of expectations.  Each “job” (or, in this case, Olympic event) has its own unique set of metrics.  Ashton Eaton, the gold medalist in the decathlon,  wasn’t going to be measured on his balance beam performance.  Nor did he (or his manager, er, coach) believe that practicing the balance beam was going to enhance his ability to perform on those activities where he was going to be measured. So – understandably and appropriately – Ashton only focused on those activities that would directly contribute to his success. 

Lesson Two:             Clear expectations

Lesson Three:          

Measure behaviors that make a difference

Because of the uniqueness of his job, the behaviors that would lead to his success were not the same as those that would lead to Missy’s or Gabby’s. 

Lesson Four: 

Make sure the behaviors being measured drive the desired result.

(Quick Quiz:  What are the ten sports that make up the decathlon?  Your answer is here). 

Last, note the simplicity of the compensation model as opposed to the complexity of the metrics.  Nobody won 1/3 medal in the vault because they had the best landing while someone else won 1/3 for having the best “in air” maneuver.  No – the person who received the gold medal had the highest combined score for ALL the metrics.  They couldn’t ignore one skill and focus on the others; they had to practice and be good at all components being measured to receive the desired “compensation.” Perhaps a better example is to stay with the decathlon:  There are no medals given in that sport to the person who wins each individual component.  The only medals are given for total scores at the end of all ten elements.

Lesson Five:        

Keep the reward simple – and make sure it is based on ALL of the behaviors you want to encourage.

Bottom line:  If you want world-class Strategy Execution, make sure

1)         Keep it simple

2)         The rewards are clear

3)         The desired behaviors are clear

4)         How the behaviors will be measured is clear

5)         Rewards aligned fully with desired behaviors

…and get out of the way.