Aligning remuneration with strategy

Aligning remuneration with strategy seem to be a common theme in most corporate turnaround I have read. For instance Continental Airlines (HBR, Sep/Oct 1998) and Baxter International change their remuneration and incentive plans to make sure each and every part of the organization is aligned with the announced strategy. And they have successfully done it.

During my MBA course of study, I also have learnt that remuneration plan is also one of the way to effectively cement any changes, be it corporate culture, strategy or structure. As such we can see the importance of the structure of remuneration plans. But how can we have a good remuneration plan? I feel the most important is a performance management system.

The performance management system should be able to measure the relevant factors. The form of measurement should be metric, meaning that it should be measurable and a number can be churned up to decide if one is performing well or not. To be aligned with the strategy, relevancy of the measure should be high as well. No use wasting resources on measuring something that is not relevant to the strategy we want to execute.

The measure should not be complex and transparent as well. As such, there would be less dispute over the measurement and energy can be channelled to executing the strategy effectively and efficiently.

It is important that the performance management system is aligned with the remuneration which in turn is aligned with the strategy otherwise, the strategy might not be executed well and it could be disastrous in a corporate turnaround where many families likelihood are affected in the case of bankruptcies or massive retrenchment.

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Buying Employee's Loyalty

Buying Employee's Loyalty is something all employers should try to do in good times and bad times. Reason is because as we understood from many management books is that high turnover can be very harmful to the company, especially those that are in the Knowledge Industry. Any staff that leave takes with him specific knowledge, skills and experience which can be very valuable. If there is an intention to replace the headcount, the organization fit and job fit might not be suitable and the corporation definitely will need time to make the new hire fully functional, usually a few months.

Of course it is unrealistic to achieve zero turnover or use legal covenants to bind the employee to the company. Doing such actions would destroy the employee's loyalty to the company and in the end he will try to rationalise his efforts in the company and not give extra value to the company. He might bad mouth the company outside and this could hurt the company's ability to attract talents. Worst thing is to leak out information of the company or take great miscalculated risk causing severe damage to company he is working in.

In this bad times, it is an opportunity to buy the employee's loyalty by treating them better than other companies which can be easily done. Treat them like customers, meet their needs using the remuneration system. Show that you care about their welfare, in fact if the company is making money, part of the profits should be shared to the employee during this bad times. Employees see that they are treated well during a downturn will be much willing to increase their loyalty to the company. Such satisfaction and happiness working in a company that cares for them in bad times can translate into greater efforts put in their jobs. The benefit is even greater in good times when other companies' staff recover from lower morale while the company that takes care of the employee's in bad times move to higher morale.

Are you buying your employee's loyalty now? Do it where possible. This recession would not last long, your company will last longer but at the end will your company be stronger or weaker after the economy disaster?

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Gathering Wisdom of Talents

Gathering the wisdom of talents is another skill the managers or entrepreneurs should learn.

Quoting a saying from Han Fei Zi,

"Low level ruler will gather all his efforts and skills, mid level ruler will gather the efforts of all, high level ruler will gather the wisdom of all."

A great ruler will rule by gathering the wisdom of his men. This applies similarly to managers as well. They must be able to gather the wisdom of his team members. The reason is because of the unique individual experiences, we can look at a problem or solutions at many angles. As such, we can be assured that most angles are covered and mistakes would not be made so easily.

So what skill is needed to "gather wisdom"? I believe there are three ingredients required.

1) Culture/Trust
2) People Skill

Are you adopting an open culture? If your culture is not open, no one will open up and you would not be able to gather their wisdom because it is locked up inside their brain and not communicated to anyone. For a culture to be open, there must be trust, trust that credit is given where it is due and trust that what they said would not be used against them.

Managers also need people's skill, to motivate, to understand and again to create a 'trusting' environment.

As a side note, if you notice, one of the ingredients required is also the five qualities that is required to be a great general, as stated by Sun Tzu. (Please click here to read the article "Five Essential Characteristic of General" and quote in Chinese Wiki)

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Nurturing Talents

Nurturing Talents is part of any managers or employers job scope. It is very important how you nurture your talents.

If you plant pomelo trees, you can enjoy its fruits that gives out a nice smell and is sweet when eaten. If you plant hedge thorns, you will be pricked by its thorns. Thus it is of importance that the ruler takes note of what he talent he is 'planting'. - Han Fei Zi, Chapter 33

From this we can see that we have to be careful how we nurture talents. If we do not nurture well, the results can come back to 'prick' us. Managing talents is always one of the most difficult part of a manager's or employer's job because there is no one size fits all management approach due to the differences in each employees.

But I feel the most basic any managers should do is to take out some time to understand their team members, in which environment they perform well, why they are doing this job and most important of all, as the saying of Sun Tzu is seen below,

When the general regards his troops as infants, they will be willing to follow him through the greatest threats and gravest danger. When the general treats his troops like beloved sons, they will be willing to support and die for him. An army may be so overly pampered by the general that it cannot be useful, so excessively loved that it cannot be commanded and so disorderly that it cannot be disciplined. Such and army is like a bunch of spoilt and arrogant brats , and cannot be deployed. - Sun Tzu Art of War, Chapter 10

treat your team members like family members, show them that you genuinely care about their welfare. Do try your best to join your team members in any dinner or game session so that you have more time to bond with them and also understand their character better. When you understand them better, you can better assign suitable tasks to them and also avoid 'destructive' conflicts.

So go and put the dinner or game appointment in your schedule now. Get yourself invited to lunch. Chat with them and be open.

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