5 Lessons from a Failed Startup Applied to Compensation

Last week I read an interesting article written by Gonzo Arzuaga, formerly of Startups.com. In it he talks about the five key lessons he learned as result of experiencing the failure of his company. As I read them, I realized each one applied to the world of compensation just as much as they did the world of entrepreneurs. I thought I’d share these with the Compensation Café readers and invite readers to add their own lessons. (note: I switched the order of numbers 4 and 5 from the original list.)

Lesson 1. Do your thing                                      
While knowing what your peers are doing is important, doing what they are doing is probably not the path to success. Too often we get caught up in market data, trends and the next great thing. Sometimes we change things that are working because some outside consultant or new executive throws out an idea. Instead of taking the time to validate our gut, we take even more time to validate theirs.

Your company has a personality, culture and unique product or service to offer the world. Don’t be afraid to stand out from the crowd of beige plans and data that permeate so many industries.

Lesson 2. There are no shortcuts
Give yourself the time to do things right. Putting together a great compensation program, getting people to understand it and then making sure it is executed properly takes time and effort. Taking two or three more weeks to get something done correctly may make all the difference. Of course, if the program is event driven you may not have that luxury, but most issues are not that unexpected.

Think of your compensation programs in the lifespan of people. We regularly put programs together that, if they were kids, would be 5^th or 6^th graders by the time they pay out. That is a long time. If you don’t plan a decade in advance you will still be planning to do the same thing a decade from now.

Lesson 3. Do one thing
I recently had a client with a compensation staff of .5 (yep, ½ a person.) They asked if they should be changing their sales compensation program at the same they were designing a new equity compensation program and reevaluating base pay for the entire company. I recommended a staggered attack. While all three need to be done, each needs to be done right. Don’t try to do everything at once, just because you have some open time over the summer.  Take the time to lay out a plan of attack. Identify the expertise you have and what you will need to bring in from outside. Then only do as many things as you can execute properly.

This quote is from Gonzo: “Do one thing, no matter how small. When you have it burning, you can make it bigger, better, faster and stronger… later.”

Lesson 4. Focus, execution and details
Some compensation pros are strategy freaks.  They like big ideas, cool concepts and how pay programs impact behavior.  Others are tactic hounds.  They tend to like the numbers and rules and make sure that things run smoothly. The trick is that execution actually applies to both strategy and tactics. No matter which type of compensation expert you are, in the end it’s all about the little things. The best ideas, plans, data, reports and presentation are only as good as the steps taken to turn things into actionable reality.

So many companies do everything right except for the last step. The last step is execution. If you can’t execute it, then don’t start it.

Lesson 5. Know when to fold up your tent and go home
This one is tough.  So many companies have half-dead plans moldering in corners of their pay programs. Lots of other companies have plans that are failures that just keep perpetuating, even in the face of stark evidence proving their lack of worth. We all need to clean our compensation house more often. We need to kill off the plans that take time and resources away from those that truly work.

Sometimes we keep plans because we put so much into them.  Other times we keep them because ending them will require a lot of communication. The worst plans are the ones that no one even knows aren’t working. Take the time to evaluate every plan every year. Clean out the old or pointless plans, even if they still look new and still have the price tags on them.

My thoughts on this are simple. The list above is fairly universal, but we often lose sight of it in the swirling storm that is every day life. If you speak to the CEO at a Fortune 500, the founder of a startup, or an Olympic athlete, they will give you very similar lists. Be who you want to be. Take the time to do it right. Don’t move on until you get it right. Focus on the little things and execute. If you executed it well and it still doesn’t work have the courage and common sense to move on to something else.

I’d love to hear your thoughts on this list. What’s missing? What examples do you have?

Dan Walter is the President and CEO of Performensation an independent compensation consultant focused on the needs of small and mid-sized public and private companies. Dan’s unique perspective and expertise includes equity compensation, executive compensation, performance-based pay and talent management issues. Dan is a co-author of “The Decision Makers Guide to Equity Compensation”,  “If I’d Only Know That”, “GEOnomics 2011” and “Equity Alternatives.” Dan is on the board of the National Center for Employee Ownership, a partner in the ShareComp virtual conferences and the founder of Equity Compensation Experts, a free networking group. Dan is frequently requested as a dynamic and humorous speaker covering compensation and motivation topics. Connect with him on LinkedIn or follow him on Twitter at @Performensation and @SayOnPay

Comments

[E. James (Jim) Brennan]

Thanks, Dan, for reminding folks of the differences between strategy and tactics.

I'd maybe add "Avoid the Perfection Trap." When time is short and resources are limited, don't let the perfect become the enemy of the good. Be careful to recognize when the result is good enough to halt the perpetual search for total perfection. It almost always requires a few mistakes to find the optimal path (http://www.compensationcafe.com/2011/01/the-value-of-mistakes.html).

[Jacque Vilet]

Great article. I especially like #5. There are plans/programs we hold on to because to let them go is like losing our safety net --- and we have to then come up with something new. Not just HR people. Look at the founders (usually) who won't let go of something they created to move on into the future. Have you ever read Vijay Govindarajan? He has a business strategy model very much like this.

Well Dan, you jumped in ahead of me on this. I was going to write about this from the Vijay angle. Grrrrr. . . .

[Doug Mauter]

Good post. So many companies try to do so much at one time. Like the always say... "Good execution beats the best plan". We sometimes need to slow down and take the time to execute the plans we have laid out.

[Dan Walter]

@Jim - The difference between Strategy and Tactics is not just lost to many in the compensation world. It is a common misunderstanding.

And as @Doug Mauter says: "Good Execution beats the best plan"

Put strategy, tactics and execution together and you usually have success.

[Dan Walter]

@Jacque
I haven't read Vijay Govindarajan, but will put him on my "to do" list.

The problem with dropping something is that often you were the one who created and built it. It is hard to part with something that you had a hand in making (read the Lego story in Dan Ariely's "The Upside of Irrationality")

Thanks for the comments and sorry I beat you t the punch. That being said I am sure more can and should be said about this.