Editor's Note: Your pay programs may not stand the test of time in the manner that the legendary hero of the Geats has. Dan Walter addresses this challenge with his Classic post.
Most of you know of the poem Beowulf. Legend has it that it was passed down through oral performances for nearly 1,000 years before it was formally documented in Old English. The poem is long and provides details that most people skim through, if they read it at all. But, it is documented and any literate person can look it up and read if they are interested. The more ambitious can (and do) even memorize it and perform it live.
Let’s first state the obvious. No compensation plan, philosophy or process is interesting enough to be carried down through 10 years of oral history, much less 1,000 years.
But, a seemingly large number of companies are crippled by processes, plan details and compensation philosophies that depend on a tradition of oral history. For example, “Sally create that spreadsheet and she really needs to be the one to run the data.” “Oh…Don't go by the plan document on that part, we have been doing it this other way for a few years.” “We state our goal is to motivate people using equity compensation, but we really only grant to the top people right now.” And, the worst, “I need to do that myself, no one else knows how.”
The readers of this blog are some of the most conscientious professionals in our industry. You are the people who take the time to stay up to speed on a regular basis. But, I bet nearly every one of you has a similar issue at your company. This isn’t about succession planning. This isn't about efficiency. This is about sanity.
I get it. Fixing this problem isn’t easy. We are strapped for time and resources. We all have higher priorities. But, at a minimum, you need to make a list of the risk factors and include a sentence or two on what it will take fix the problem. Have the list reviewed by anyone who may have pertinent knowledge. Then, give this list to your boss and let him or her know that you would like some assistance in addressing these issues. Make certain that you explain the potential risks without hyperbole or worst-case scenarios (unless asked.) Then bring it up once a quarter until help arrives or, sadly, one of your predictions comes true.
Being a compensation professional is difficult. Every aspect of our profession is more complex and more scrutinized than ever before. When processes are dependent on specific people, they really aren’t processes. When our plan documents don't reflect our actions, we create unneeded risk. When our philosophy doesn't drive our behaviors, we have no defense in time of need. When we depend on an oral history, we do both our companies and ourselves a disservice.
Dan Walter is a CECP, CEP, and Fellow of Global Equity (FGE). He is a “Compensation Futurist” who works as Managing Consultant for FutureSense. Dan is also a leading expert on incentive plans and equity compensation issues. He has written several industry resources including the only resource dedicated to Performance-Based Equity Compensation. He has co-authored ”Everything You Do In Compensation is Communication”, “The Decision Makers Guide to Equity Compensation”, “Equity Alternatives” and other books. Connect with Dan on LinkedIn. Or, follow him on Twitter at @DanFutureSense.
Bureaucrats protect their rice bowls.
OTOH, institutional memory is an extremely valuable commodity to preserve... as long as it doesn't get ossified and clog up the arteries of the living enterprise, of course.
Posted by: E. James (Jim) Brennan | 07/01/2020 at 03:51 PM