Pay for Performance Lessons from the Tour de France

The 2014 Tour de France is 2276 miles (3664 K). It is a grueling race that covers 21 stages that include mountains, hills and flats. The “winner” is the individual with the lowest total time at the end of the final stage. How they accomplish this goal is very enlightening and applies directly to pay for performance and corporate culture.

Every rider is part of a team. Every team has a designated leader. The leader is generally very good at multiple disciplines, while other team members may have specific skill sets that are important during different stages. The final trophy is presented to an individual, but no one rides alone.

Like the employees at most companies, many of the team members work hard but are fairly anonymous. And like corporate executives, the lead rider gets most of the glory, money and fame. The top riders on each team can make more than $1,000,000. The average salary is around $200,000 and there is even a mandatory minimum wage of $52,000. In addition to these amounts, there are performance bonuses, appearance fees and other considerations. So, in general, the riders are paid much like employee of most companies.

Individual performance is lauded. The specialist riders have specific goals throughout the race. The sprinters, hill climbers and young riders all get recognized from day one through the race completion. They compete in races within the race even as they help their teams.

We all know it can be hard to see how each employee contributes to the success of a company. The Tour de France is great because the teamwork involved in winning the Tour can be easily seen every mile of the race. The teams mostly ride in groups to make the race easier on the team leader. They protect the key players and they allow for a team to control the pace of the race. When everyone is riding well it is similar to an effective software development or manufacturing team. It’s when things go wrong that we see our real pay for performance lesson.

When an average rider crashes or has a mechanical problem, they can quickly fall behind the peloton (or pack of riders). The lower level riders may get help from a teammate or may be left to work their way back to the team. But, when a team leader goes down, a multi-person escort immediately falls back to ensure their path back to the front is as easy as possible. Yes, this is the guy who is paid the most, but he is also the guy who is most likely to get every team member a win. There is a team manager riding in car who decides who gets help and how much help will be given.

Rather than build an all or nothing environment where an individual must perform perfectly or be left by the roadside, the teams understand which individual gives them the best chance to win. As long as the team leader provides them with the best chance in the long run, the team will do anything to support them. As pay for performance becomes the new normal this is a lesson we must all remember.

Designing a plan that pays all or nothing creates many issues. It magnifies a single failure into what may seem like complete failure. It can leave an individual feeling like they have no support to get back to the front, even when they provide the best chance for everyone else to win. It can inspire people to display bad behaviors. The leaders may “bend” rules in order to win. The next layer of players may be inspired to sabotage the leader to capitalize on their own opportunity. In long-term incentives, the focus on the end of the race can distract from the day to day strategy and tactics required to stay in contention. In short, providing for small wins and measured success along the road is a far more effective way to win a race.

The Tour’s focus on the team work, interim goals, long-term planning and execution make it a great example of how to do many things right. Of course, it has had many ignoble problems over the years, which also shows the need for great oversight and management. Let’s discuss “all or nothing” plans that have worked or failed in your career.

Dan Walter is the President and CEO of Performensation a firm committed to aligning pay with corporate strategy and culture. Dan and fellow Compensation Café writers, Ann Bares and Margaret O’Hanlon are happy to announce our new book: “Everything You Do in COMPENSATION IS COMMUNICATION.” Dan has also co-authored of several other books including “The Decision Makers Guide to Equity Compensation”, “If I’d Only Known That”, “GEOnomics 2011” and “Equity Alternatives.” Connect with him on LinkedIn or follow him on Twitter at @Performensation and @SayOnPay.

Comments

[Trevor Norcross]

Great post Dan,
This is also why I advocate a holistic integrated approach to total rewards. Not only does each component need to be well thought out they have to work together. Each component has a different focus and time horizon and each needs to be aligned to support other for optimization.

[Tony Bergmann-Porter]

This is a really interesting and clever analysis by analogy. Lots to think about here.

[Dan Walter]

Thanks for your comments.

A holistic approach is the way to go. Like any major shift it cannot be done in one quick rollout. The company must be committed to an evolutionary implementation to a revolutionary idea.

I can understand how this can be a tough sell at many companies. I can also understand why many compensation professionals cannot see the upside of so much work for such a long-term and, perhaps, tenuous career goal.

Of course, that is also why only a few have a real chance to win the Tour de France each year.

[E. James (Jim) Brennan]

Funny, how professional racers receive incentives rather than competing solely for the intrinsic satisfaction of the enjoyable sport of bicycling. Most people do it as a form of entertainment, so they don't demand pay. When the activity is a business rather than "play", modes of behavior shift (like gears?) and different reinforcement elements become appropriate.

Thanks for the lesson within the lesson, Dan!

[Dan Walter]

Jim,

Thanks for the lesson, inside a lesson, inside a lesson