Leading at Light Speed is a powerful leadership book by Eric Douglas revealing the 10 specific ways an organization must act and behave to build trust, spark innovation, and create a high-performing organization. In Chapter Six, Stimulate the Creative Flow, Eric discourses upon Aligning Compensation and Rewards.
Many companies link compensation to performance, believing that it will motivate people to make the organization more successful. To some degree it will. However, the flow of creativity increases more when the strength of the organization and its success is made primary, rather than the efforts of one person or group. What follows is a suggestion about sparking creative flow and innovation via the alignment of compensation:
First calculate the Total Maximum Compensation (TMC) that a person should receive. Certain forward-thinking organizations, including Google, restrict the compensation level of the highest paid executives to a particular multiple of the lowest paid, e.g., 10 times. Therefore, if $50,000 is the lowest, then an executive’s maximum payment would be $500,000.
I believe a fair base compensation for corporate executives and senior leaders should be up to one-half of their TMC, guaranteed. So if the TMC for a particular leader is $1 million, then the base could be as high as $500,000. The remainder should be paid out in bonuses, based on the organization’s overall performance targets and balanced scorecards.
Here are some forms of forward-thinking compensation you can use to reward people for performance and spark creative flow:
Gain sharing: This is an awards fund that is based on how well an organization does in meeting its strategic or business goals. Regardless of position, every employee receives a cash bonus. Every employee’s bonus should reflect clearly established measures of success – when such transparency exists, trust grows within the ranks of the organization.
Team innovation awards: By announcing you’ll reward teams that do a superb job achieving specific innovations, you can motivate everyone without eroding trust. In order to foster the most productive team spirit, it is highly suggested that no one team shines above the others on a regular basis; the wealth and glory should be equally available and realized to all, over time.
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