Tuesday, August 5, 2014

Leaders Eat Last

I just saw a book by Sinek called Leaders Eat Last. At first it was going to talk about a incredibly brave bonus plan I heard about years ago. However, it does promote setting the right culture, primarily based on trust and collaboration. Things I've been writing about for years as a way to gain true competitive advantage. I certainly encourage every organization to look at these issues.

But let's talk about the bonus plan that might be a clear signal that the organization is more important than the horse's patoot at the top. (Okay, that's a little snarky because I've also been that...at the top.) Balaji Krishnamurthy created an incentive plan that is inverted and 'cascading' from the bottom to the top. There are performance goals for different organizational levels. The higher your position is in the hierarchy the greater your performance goal. You won't receive your bonus unless your subordinates have received their bonus. Also, because the bonus is prorated, the higher tiers don't get a bonus until the lower tiers' bonuses are fully doled out. Krishnamurthy has described like an inverse pyramid of champagne glasses. The bonuses don't overflow to the lower levels until the top is full, i.e. until everyone above in the inverted organizational chart has received their full bonus based on exceeding their performance targets.

In most companies, since executives' pay has a portion that based on performance and only a little in base salary, executives tend to get bonuses every year while the people in the trenches don't. Culturally, it says, "Yeah, we're having a horrible year and you had reduced hours and pay, but I need to get the bonus due me according to the employment contract." Executives eat first from the bonus trough.

In B.K's plan, leaders eat last. What do you think this communicates to the whole organization? "As an executive, I don't get to appreciate any extra unless you already have." When people are dependent on each other, high levels of collaboration could occur. Add the monetary incentive for this kind of collaboration--and executives clearing the obstacles preventing success--your competitive advantage might just take off.

No comments:

Post a Comment