Are Your Compensation Plans on Autopilot?

In our busy organizational lives, many of us allow our compensation plans to simply roll forward from year to year with only minimal adjustments.  Or we follow regular schedules for periodic review and intervention in an effort to ensure some level of oversight.  In doing so, however, we may be at risk for missing important signals that the plan is not working as intended.

In their book Decisive: How to Make Better Choices in Life and Work, Chip and Dan Heath examine the double-edged sword of operating on autopilot.  While there are benefits to being able to tune out certain things and free out minds to focus on others, it can be difficult to interrupt the autopilot cycle once we fall into that pattern.

The antidote to autopilot, they say, is the tripwire.  Day to day changes in an organization can be so gradual as to be nearly imperceptible to those of us on the inside.  Like the poor amphibian in the well-known boiling frog story, where the little green felllow is placed in cold water that is slowly heated up until he's cooked before even realizing he is in danger, it is hard to know when to jump.  Tripwires tell you that it's time to jump - or at least time to start paying attention.

The Heaths share a story about trip wires from the world of rock and roll featuring Van Halen (and lead singer David Lee Roth), one of the first rock bands to bring major stage productions to smaller markets.

The band's production design was astonishingly complex.  The contract specifying the setup was, according to Roth, "like a version of the Chinese Yellow Pages" because it was so technical and complex it was like reading a foreign language.  A typical article in the contract might say, "There will be fifteen amperage voltage sockets at twenty-foot spaces, evenly, providing nineteen amperes..."

While Van Halen had its own road crew, much of the prep work had to be done in advance, before the eighteen-wheelers arrived.  Van Halen and its crew lived in feat that the venues' stagehands would screw something up and leave the band exposed to injury.

The band was notorious for partying and egos.  One frequent rumor about Van Halen's outrageous behavior featured a clause in their contract demanding a bowl of M&Ms backstage, with all the brown candies removed.  Roth - who had a reputation for walking backstage, spotting a single brown M&M, and freaking out - became the symbol of rock star divadom.

The rumor turns out to be true.   There was an "M&M clause" written into the contract, buried in the middle of volumes of technical specifications.  It was there for a reason.

When Roth would arrive at a new venue, he'd immediately walk backstage and glance at the M&M bowl.  If he saw a brown M&M, he'd demand a line check of the entire production.  "Guaranteed you're going to arrive at a technical error," he said.  "They didn't read the contract ... Sometimes it would threaten to just destroy the whole show.

Turns out that Roth (at least in this aspect) was less a diva and more an operational master.  The brown M&M was a tripwire.  It forced the band to step out of autopilot and take the time for a complete check of the set-up at the venue.

A number of compensation examples come to mind.

Is your incentive plan on autopilot, chugging along without consideration of changes in the business and potential undesired consequences?  Perhaps there is a data point or two that could serve as a tripwire here; for example, metrics that might alert you to emerging safety issues in the wake of implementing new productivity incentives, despite your leadership team's confidence that supervisors could "manage away" this potential risk.

Or might a tripwire make sense to help keep abreast of pay competitiveness for a critical set of jobs?  Should a certain level of turnover or number of departures signal that an immediate market audit is due?

Where might you use a tripwire to protect from pay plan autopilot?

Ann Bares is the Founder and Editor of the Compensation Café,  Author of Compensation Force and Managing Partner of Altura Consulting Group LLC, where she provides compensation consulting to a range of client organizations.  Ann serves as President of the Twin Cities Compensation Network (the most awesome local reward network on the planet) and is a member of the Advisory Board of the Compensation & Benefits Review.  She earned her M.B.A. at Northwestern University’s Kellogg School, is a foodie and bookhound in her spare time. Follow her on Twitter at @annbares.

Creative Commons image "Flight Control Unit (Autopilot) A340-300" by superkas83

Comments

[E. James (Jim) Brennan]

While the Van Halen story may be true, the boiling frog one is generally disputed as a myth, although it remains a useful metaphor. This policy http://www.compensationcafe.com/2011/07/divorce-pay-a-modest-proposal-for-a-new-policy.html was exactly such a tripwire. Inserted in a draft management policy manual for a well-known global corporation with very generous perquisites, it worked as designed. When it was discovered, the inquiring HR manager asked if it could be applied retroactively.