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.

Quality Counts

I had a great conversation with a client this week about Quality.

A team was given a task - to provide new technology to the field organization - by the company's CEO, and she wanted it done fast. The CEO had a clear vision of what she wanted and described it in detail to her team. She made clear what resources would be available to the team. And she gave them the deadline by which she wanted it in place and operating.

The team sprang to work. It knew it had a tremendous challenge on its hands. The time frame was extremely tight - call it too tight. The resources were extremely limited - call them too limited. And the CEO's vision of what she wanted was clear and ambitious - call it too ambitious. Something had to give. And in this case - it was Quality.

The team delivered on time - the technology got out into the field. The cost was within budget - there was no tolerance (nor availability) for anything more. And the scope - well, the technology was designed to do everything the CEO wanted.

You know the punch line: It didn't work.

You've probably seen the Scope-Resources-Time triangle. Many organizations have adopted it, with the mantra: Pick any two. The concept is simple. Management can fix any two of the three components, so long as the third can flex. Try it:

• Scope and Resources are fixed - The project may take longer than planned
• Time and Resources are fixed - The project may have less scope (functionality) than desired
• Time and Scope are fixed - You may need more resources to get the full functionality complete on time.

The triangle is very valuable - but as you can tell from the story (oh, and the title of this blog), it's not complete. The missing ingredient is Quality.

The fact is, you can fix three components: Scope, time, and resources. But what gives then is the quality. It's not tested, it's not right, it doesn't work.

Here's a simple example you can try on for size: Cooking a gourmet meal. (Have you ever watched one of the reality cooking shows?) Requirements (scope) are fixed - 3 courses, including certain key ingredients. Check. Time is fixed - one hour. Check. Resources are fixed - one chef plus kitchen equipment. Check. So, are the "True Goals" of a great meal always met? Of course not. The missing variable is Quality.

There are plenty of examples of failed execution because of failed Quality. Quality is hard to protect, frequently because it is "expected" and therefore not made explicit nor monitored and measured. We know what happens when something isn't measured, don't we? Right. "You want it respected? Then inspect it."

What happened with this CEO and her challenge? Well, it's in clean-up mode. More dollars (lots) and resources (ditto) have been thown at the problem, trying to fix it. Even worse, putting bad quality out in the field has major, long-term ramifications. You lose trust and credibility. The next solution will be looked at with skepticism and suspicion ("Hah, you think that's going to work? Don't you remember...?"). Fortunately, this was an internally focused initiative. Could you imagine the problems created if this had been client-facing?

It's not pick any two - it's pick any three. Quality is not a given - it is a choice. The commitment to Quality needs to be explicit. It needs to be monitored and measured. Otherwise, Quality can fail, like any other unmeasured metric. And if quality fails, you (and your initiative) will never Reach its True Goals.