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Ryan’s Journal: When Is It Enough?

Thursday, July 27th, 2017

https://www.flickr.com/photos/archive-history/114082837/

Some of you may know that I work in software sales. I enjoy the work along with the highs and lows that come with it. Something else that comes with the territory is money.

I have found money brings out the truth in people. When you have enough money where the opinion of others is not important, the true colors shine. Sometimes the result is great, other times not so much.

I had an opportunity this week to spend some time with some successful sales people who are climbing the mountain of corporate success and doing well. I was able to observe the behavior of a few different folks and see their true colors.

In one case there was a guy who has risen up the ranks and I was actually looking to him as an example of what to do. I was utterly disappointed. His main drive was money, sure that’s fine, but there was nothing more. In fact, I am unclear of what he cared about other than that. His only other hobby appeared to be drinking. I don’t mean that to sound negative; he is a connoisseur of fine wines and spirits.

I met another guy who grew on me. I met him three days ago and my first interaction was him asking me for a favor. During that moment though he was honest with why he needed it; I was in a position to help and it got him out of a jam.

As we spoke through the next few days I realized this guy had substance. He was rising up, but not there yet. He was humble, truthful and eager to learn. In addition, he handled the first guy I mentioned with grace. In this case the first guy was this person’s boss.

Throughout this journey I asked myself, “when is enough enough?” The first guy just wanted more and more money. The second writes screenplays, enjoys hiking and tries to give back.

In both cases you can never have enough. There is not enough money, but also not enough hikes, to find fulfillment.

Perhaps there is never enough.

Perhaps all that matters is what you are filling up that hole with.

Image credit: stop crap

Golden Oldies: Incentive Doubleheader

Monday, July 24th, 2017

It’s amazing to me, but looking back over more than a decade of writing I find posts that still impress, with information that is as useful now as when it was written.

Golden Oldies are a collection of what I consider some of the best posts during that time.

Companies constantly talk about what they are doing to incentivize productivity and innovation. Incentives are supposed to help drive performance. Recognition is very important as are financial rewards — as long as they are seen as fair. If not, they act more as disincentives, as seen in the first post.

The second focuses on sales incentives.Maximizing revenue generation, AKA, sales, is a top priority for every business, from micro startups through the Fortune 10. Commissions have always played a significant role incentivizing salespeople  — until they don’t.

Read other Golden Oldies here.

The Reward Should Fit the Act

1095615_success_wayAre you familiar with the saying “let the punishment fit the crime?”

It’s a valid approach, but it’s just as true that the reward should fit the action.

A friend of mine works for a Fortune 1000 company in a tech support role. He’s well respected lead tech in his group.

Last year he developed an idea on his own time and gave it to his company.

As a result, he was flown to annual dinner and presented with an award and a $5000 bonus.

Sound impressive?

His idea will save his company $5 million or more each year.

Still impressed?

My friend isn’t.

He has a friend who is very impressed, but that’s because his company doe nothing; no recognition whatsoever.

My friend feels that a $5K reward for saving the company $5M or more every year, while being better than nothing, is still just short of an insult.

Other than being disappointed what’s the fallout?

He likes his job and his boss, so he’s not planning on leaving, but…

He has another idea that he’s not going to bother developing.

He’s still one of the most productive people they have, but that extra edge is gone.

What do you think his employer should have done?

Join me tomorrow for another look at how, to quote another old saying, companies keep cutting off their noses to spite their faces.

Image credit: dinny

 

Ducks in a Row: Incentive Stupidity Knows No Bounds

http://www.flickr.com/photos/finsec/354260437/Yesterday I told you how a company squashed my friend’s initiative by giving him a bonus that had no relationship to the value he provided them in annual savings.

This reminded me of something that happened back in the early 1980s when sales was truly dependent on the skill, relationships and reputations of salespeople.

Another guy friend, another incredibly stupid company.

In a nutshell,

  • Guy outsold every salesperson both internally and at the competition. He had years of experience; relationships with customers that didn’t quit and unmatched skill at understanding customers and convincing them that his company (whichever it was) had the best solution available.
  • One day guy was called into the CFOs office and told that his commission was being capped.
  • He was on track to earn more than the president and that was unacceptable; he asked if they were sure that was the only solution and told yes.
  • Guy proceeded to write a resignation letter on a sheet of paper he borrowed from the CFO.
  • He left the offices without speaking to anyone.
  • By the time he reached home there were three name-your-own-terms offers from competitors on his voicemail.
  • He started with his new company the next day.

Over the years I’ve found that actions like these usually come from the company’s bean counters. (In this instance, ‘bean counters’ is definitely a derogatory term.)

Apparently, some bean counters involved never learned to do the math.

In both cases the actual cost was zero, since they were funded from direct actions well beyond anything expected of the employees involved.

The lesson here is that you never cap a commission and the reward for saving $5 million annually should be at least 1% of one year ($50,000) as opposed to .001% ($5,000).

I realize it’s difficult for some financial types, executives and managers to understand, but that is why bonuses and commissions are called incentives—not disincentives.

Image credit: Finsec

Ryan’s Journal: A Tale of Two Cultures

Thursday, June 22nd, 2017

https://www.flickr.com/photos/anthonyalbright/4650310001/

I had an opportunity to witness two distinct cultures in action in my personal life this past week. I am in the Tampa Bay area of Florida. Like most mid-market cities there are several startups and rising companies throughout. I have friends at two that have had events transpire as of late that had two completely different outcomes and I wanted to share my observations.

One company that is located here is backed by VC’s and has been growing rapidly. They have a great culture from how I understand it. Very laid back, treat you like a friend and encourage all team members to go beyond their own role to take on more responsibility.

My friends who work there always talk about the company with pride and enjoy working there. The CEO is a thought leader in the community and can cut to the core of what is needed to accomplish the job.

In my current role, I also use this company as a customer. They provide data on prospects from several databases. It is not unique as there are many in this space, but they provide an excellent customer experience and the data is usually accurate.

Last week we were told that we would no longer be able to access the application. I reached out to my friends and it was the worst news you could hear.

The company was not able to secure another round of funding and they had to close their doors.

This happened basically overnight. They were brought in on a Tuesday told the bad news and sent on their way.

My first reaction is that the folks who worked there would be bitter about the company and the way they were let go. That could not be further from the truth.

Are they out of jobs? Yes. Do they need to scramble to pay bills? Yes. However, they also felt like they were a part of something bigger than themselves.

President Theodore Roosevelt famously spoke about the man in the arena, “The credit belongs to the man who is actually in the arena, whose face is marred by dust and sweat and blood; who strives valiantly; who errs, who comes short again and again, because there is no effort without error and shortcoming….”

These folks were in the arena and were honored to have strived. They spoke positively of the company and its CEO, realized sometimes you lose and looked at the opportunity to learn as a valuable experience.

In my opinion life is about balance. In the same week as the above news broke I had some friends at another company I am familiar with share some news.

This company is no longer a startup; I would call them a rising company. No VC backing, the CEO started with his own money and they have been profitable through customer acquisition for some time. (I realize if you are in Silicon Valley you may find the concept foreign, but it does still happen.) This company started out with a great culture. Awesome offices, snacks and coffee, smart folks to work with. From the outside looking in it is very desirable.

This company has been on the decline with sales in recent years. It could be the industry it serves or that the products haven’t adapted to the needs of the marketplace.

Speculation from my friends has ranged as they truly believe in the company and its founder. He is a thought leader as well, spends a lot of time with Richard Branson and other luminaries, and is extraordinarily intelligent.

However, sales have been down and it has caused strain on the company.

They recently released the new comp plan for the sales team.

We could discuss how releasing a comp plan in month five and making it retroactive to January is a problem, but that’s not the point of this post.

The team was excited to hear what the new plan would be as some of the teams hit and surpassed their goals last year and figured they would be honored for that.

This could not be further from the truth. The new comp plan essentially cut their income by as much as 30%.

Now the average income for these folks was between $100,000-$150,000 annually. 30% is a huge cut and most may not be able to absorb that. Six figure deals that would bring in commissions of five figures dropped in some cases to the hundreds in commission earned on that deal. I’ll let that sink in for a moment. What’s the incentive to work!

The reaction from my friends there was as expected. They felt betrayed.

This company strives in being inclusive, expecting hard work from the team and tries to create a fun atmosphere.

These folks are invested, they love the company and the friends.

However, when you sign on and are told that you will make X amount and the company flips that on you halfway through the year it causes issues.

I cannot imagine how you would expect a great effort out of team members who feel betrayed and are now worried about paying bills.

Two different companies, two different outcomes.

How would you do it differently?

Flickr image credit: Anthony Albright

What Is Success?

Wednesday, June 7th, 2017

https://www.flickr.com/photos/planeta/5306860886/Yesterday we considered the idiocy of postponing your career in an effort to “find your passion.”

The popular attitude is that if you do something you are passionate about then it will lead to success.

Of course, that depends on how you define success.

Most people believe that if they are successful they will also be happy.

Coincidentlly, a large percentage of them have also bought into the current attitude that equates success with money.

So it comes as a major surprise to many who have achieved financial success to discover they still aren’t happy.

Rather than my opinions, I thought you would find these stories more enlightening.

First, an unhappy $150K a year millennial woman at 26 to happy single momhood and $50K five years later.

I realized that higher pay didn’t equate to a better job fit for me. I do know that at the end of the day, life is so much richer than the number on your tax form — and that’s a lesson that’s priceless.

Not that there is anything wrong with financial success.

Ed Schweitzer moved his company into the future decades ago and has already accomplished in terms of good jobs what Washington claims it’s going to do by turning back the clock.  

Schweitzer Engineering Laboratories, a manufacturer of sophisticated equipment for the global power industry based in Pullman, WA, solved its people problem internally.

While others outsource, Schweitzer goes DIY. While others establish a tightly focused definition of work history and skills they’re looking for, Schweitzer focuses on fundamentals: “I like to hire smart people with good values and strong fundamental education,” says founder Ed Schweitzer, who started the company in his basement 35 years ago. Today, it employs just over 5,000 and has revenue of nearly $1billion.

Schweitzer also set the company up as an ESOP, meaning it’s employee-owned.

Even in Silicon Valley, maximizing financial success isn’t everyone’s preferred road, like Craig Newmark — the Craig in Craig’s List.

“Basically I just decided on a different business model in ’99, nothing altruistic,” he said. “While Silicon Valley VCs and bankers were telling me I should become a billionaire, I decided no one needs to be a billionaire — you should know when enough is enough. So I decided on a minimal business model, and that’s worked out pretty well. This means I can give away tremendous amounts of money to the nonprofits I believe in … I wish I had charisma, hair, and a better sense of humor,” he added in a completely deadpan voice. “I think I could be far more effective.”

When enough is enough.

A quaint concept by today’s standards.

Read the stories.

Think about them.

Then create your own definition of success—what you want, not what you’re supposed to want.

Image credit: Ron Mader

Ducks in a Row: Value-Based Compensation

Tuesday, April 18th, 2017

https://www.flickr.com/photos/gardener41/1452771619/

Yesterday we considered the error companies make by basing offers on salary history, instead of future performance.

That may be about to end, at least in the outliers of Philadelphia and New York City.

In short, the law prevents employers from asking candidates about their current/previous compensation.

Candidates can volunteer the information, but can’t be asked for it by the company or any recruiting process, including third parties.

Doing so opens them up for lawsuits.

Ignoring implementation and legal hurdles, what does it really mean and why do I see it as such a positive?

Primarily because I don’t believe that either performance history or salary history has a damn thing to do with the value candidates bring to their next job.

Companies need to have a hiring range for each opportunity based on the impact that specific position should have on the company’s success.

The low end is based on average performance, while the high end is the result of an over achiever in the position.

The offer should be the highest number within the range based on the hiring manager’s evaluation of the candidate in light of two strong constants.

  1. 98% of star performers become stars as a function of their management and the ecosystem in which they perform.
  2. People who join for money will leave for more money.

Merit raises are then given based on that individual’s actual contribution to the company’s success, as opposed to some number from HR.

This puts most of the responsibility on the hiring manager — exactly where it belongs.

Image credit: gardener41

Golden Oldies: Pay For Performance

Monday, April 17th, 2017

It’s amazing to me, but looking back over more than a decade of writing I find posts that still impress, with information that is as useful now as when it was written.

Golden Oldies are a collection of what I consider some of the best posts during that time.

Money. Everyone’s favorite subject that no one wants to talk about. Especially when it comes to work, as in, “what were you making previously” and “what are you looking for now?”  

Tomorrow’s post focuses on a new law enacted in Philadelphia and New York City that has the potential to change that entire, unwanted conversation, forcing managers/companies to focus on the future, as opposed to history.

Read other Golden Oldies here.

starIn a post last week I asked for opinions on the ideas presented in a series of articles in Business Week on managing smarter but especially one that claims that “treating top performers the same as weaker ones is ‘strategic suicide’” and said I would add my thoughts in a future post.

Bob Foster left two interesting comments (well worth your time to click over and read). Regarding pay for performance he tells the story of a company where everybody from the CEO down all quit.

“Taking on the task to salvage the company, I hired new people that met unusual qualifications: they had to be qualified for the job they were applying for; they had to be unemployed and available immediately; they had to work at sub-standard wages; they had to work while knowing the company could close at any minute; and they had to work without supervision. The team that came together produced a highly successful company, and it was not because of high pay, or performance bonuses (there were none). The team stayed together, and performed, because of mutual respect, trust, appreciation, and consideration—people were ‘valued.’ To me, this is the truest form of ‘pay for performance.’”

I agree that trust was one of the key ingredients in what Bob accomplished, but it wasn’t the only one—or maybe I should say that it needs to be based on fairness and honesty.

Bob says the pay was ‘sub-standard’, but I assume that it was universally sub-standard relative to position and experience. If he had chosen to pay part of the team, say 10% more than their peers, the team wouldn’t have coalesced.

And that is exactly why I disagree with the idea of paying top performers, AKA stars, big sign-on bonuses or higher salaries than their peers.

  • Based on my own experience, 98% of star performers become stars as a function of their management and the ecosystem in which they perform. Change the management, culture or any other parts that comprise that ecosystem and the star may not survive.
  • Just as a chain is as strong as its weakest link there is no star in any sport, business, media, etc., who can win with a team that is subject to constant turnover and low morale.

Consider this common example.

Two people are hired at the same time with the same background, same GP0 and similar work experience, but with the one exception. One graduated from a ‘name’ school and the other from a community college. Starting salary is $50K, but the manager adds a 20% premium to the first candidate’s offer on the basis that she must be better to have gone to that school.

Neither candidate lived up to their potential because the manager made poor choices. In doing so he set both up to fail but for different reasons; one thought she had it made and the other that he was low value.

Merit bonuses fairly given for effort above and beyond acceptable performance levels make sense as long as they don’t come at the cost of developing new talent.

But one problem with ‘pay for performance’ is the pay often comes before the performance, but there are others and I’ll discuss them more Thursday. In the meantime, here are links to five posts from 2006 that give more detail on the trouble with stars.

Stars—they’re in your MAP

More about stars and MAP

Rejects or stars?

Star compensation

Retaining Stars

Image credit: sxc.hu

There were several interesting comments on the original post; check them out.

Psychological Manipulation: The Popular New Management Tool

Tuesday, April 4th, 2017

https://www.flickr.com/photos/26173922@N06/12105796185/It’s likely you are too young to have heard of a book called The Hidden Persuaders.

Originally published in 1957 and now back in print to celebrate its fiftieth anniversary, The Hidden Persuaders is Vance Packard’s pioneering and prescient work revealing how advertisers use psychological methods to tap into our unconscious desires in order to “persuade” us to buy the products they are selling.

A classic examination of how our thoughts and feelings are manipulated by business, media and politicians, The Hidden Persuaders was the first book to expose the hidden world of “motivation research,” the psychological technique that advertisers use to probe our minds in order to control our actions as consumers. Through analysis of products, political campaigns and television programs of the 1950s, Packard shows how the insidious manipulation practices that have come to dominate today’s corporate-driven world began.

It was considered highly unethical and, although there was no social media to spread the word, people were vocally upset enough that many companies stopped doing it.

Gone but not forgotten.

The behavioral social science behind Hidden Persuaders continued to grow and became a driving force underlying the deliberate addictiveness of video games.

60 years, continued research and a name change to “gamificaton” and it has become the basis of today’s management approach for gig economy companies like Uber.

Uber helps solve this fundamental problem by using psychological inducements and other techniques unearthed by social science to influence when, where and how long drivers work. It’s a quest for a perfectly efficient system: a balance between rider demand and driver supply at the lowest cost to passengers and the company.

Employing hundreds of social scientists and data scientists, Uber has experimented with video game techniques, graphics and noncash rewards of little value that can prod drivers into working longer and harder — and sometimes at hours and locations that are less lucrative for them.

Is it ethical to manipulate a workforce to produce more work at less cost to their non-employer?

Of course, Uber and “ethical action” seems an oxymoron, but psychological manipulation does appear to be on the uptick in many companies.

This article should be required reading for anyone who works in the “gig economy” or is thinking about doing so.

Hat tip to KG for pointing it out.

Image credit: Geoff Simon

Misogyny — Follow The Money

Wednesday, March 29th, 2017

Perhaps Susan Fowler’s post about the harassment she endured and Uber’s culture in general is more empowering than some thought it would be.

Especially regarding Silicon Valley’s “untouchables.”

I say that, because another woman, AJ Vandermeyden, just went public, although the lawsuit was filed last fall.

Only this time it’s Tesla and she still works there; not only works, but loves her company.

“Until somebody stands up, nothing is going to change,” she said in a recent interview, her first comments about a discrimination lawsuit she filed last year. “I’m an advocate of Tesla. I really do believe they are doing great things. That said, I can’t turn a blind eye if there’s something fundamentally wrong going on.”

Tesla’s response was hilarious, in as much as it parroted almost word-for-word the Valley mantra.

“As with any company with more than 30,000 employees, it is inevitable that there will be a small number of individuals who make claims against the company, but that does not mean those claims have merit”

Whoo hoo. Doesn’t that just give you a warm, fuzzy, confident feeling of trust?

Things were better for women 30-40 years ago. What happened?

For one thing, at least for tech, video games happened.

But that’s just one reinforcing piece.

The Atlantic took a more comprehensive look at the misogyny so prevalent in tech culture.

Investigators often say that the best way to trace anything is to “follow the money.”

Turns out that applies here, too.

When Silicon Valley was emerging, after World War II, software programming was considered rote and unglamorous, somewhat secretarial—and therefore suitable for women. The glittering future, it was thought, lay in hardware. But once software revealed its potential—and profitability—the guys flooded in and coding became a male realm.

Now look a bit further and think about the industries notorious for their bad treatment of women.

Wall Street/financial services. Law. Doctors. University-level teaching. Architecture. Chefs. Construction and journeyman crafts. I can keep going.

What do they have in common?

Follow the money.

White and blue collar = high pay.

Pink collar = low pay.

Money means freedom. Freedom to choose. Freedom to walk — from a job or from a relationship.

Put another way, money means control.

The more money you have the more control you have over your world — whether for good or for evil.

So maybe control is the real root cause.

Men (some, not all) need to control women, AKA, mom…

Poor, insecure, little guys.

Trying to change their past by taking revenge on the present and, in doing so, damaging the future.

Video credit: Business Insider

If The Shoe Fits: Hypocrisy And Greed In Startup Land

Friday, January 27th, 2017

A Friday series exploring Startups and the people who make them go. Read all If the Shoe Fits posts here.

5726760809_bf0bf0f558_mTuesday I cited a post by Scott Belsky on Medium talking about how employees are often conned (my word) by founders, especially unicorns, when it comes to the wealth that is supposed to flow from their ISO.

As pithy as the post was, some of the comments were even pithier. I especially like this one from  colorfulfool (21st comment)

If profitability were proportional to hypocrisy, there would be no failed startups in the Valley.

Not just true, but succinctly and elegantly stated.

Founders love to talk about the importance of transparency, trust and authenticity.

However, their stock plans and pitfalls thereof exhibit such a high degree of opaqueness and caveat emptor that they kick a hole the size of Texas in the fabric of the founders’ authenticity.

Another prevalent piece of hypocrisy is “change the world.”

Do you really believe that another dating app or being able to evaluate a new restaurant or a better way to buy your groceries will change the world?

While they may impact one’s personal world, they certainly don’t have the impact of something like Mine Kafon.

What is proportional to the Valley’s hypocrisy is its sheer greed.

Actually, when I stop to think about it, the greed probably exceeds even the hypocrisy.

Image credit: HikingArtist

Ducks in a Row: Walmart — King of Spin

Tuesday, October 25th, 2016

https://www.flickr.com/photos/64738468@N00/2212721973/

More proof that what What Walmart really excels at is PR and spin.

After years of angry customer complaints about dirty stores, unstocked shelves, uncaring employees and an exodus of customers to the competition Walmart had an epiphany.

Maybe, just maybe, they had cut worker pay too far.

What if paying workers more, training them better and offering better opportunities for advancement can actually make a company more profitable, rather than less? “Efficiency wages” is the term that economists — who excel at giving complex names to obvious ideas — use for the notion that employers who pay workers more than the going rate will get more loyal, harder-working, more productive employees in return.

Of course, Henry Ford figured that out in 1914 and companies such as Costco have followed suit.

Ford astonished the world in 1914 by offering a $5 per day wage ($110 today), which more than doubled the rate of most of his workers. (…) The move proved extremely profitable; instead of constant turnover of employees, the best mechanics in Detroit flocked to Ford, bringing their human capital and expertise, raising productivity, and lowering training costs.

However, these days, money isn’t everything. People want more challenges, more ways to grow and better career opportunities.

“We realized quickly that wages are only one part of it, that what also matters are the schedules we give people, the hours that they work, the training we give them, the opportunities you provide them,” said Judith McKenna, who became chief operating officer in late 2014, in a recent interview. “What you’ve got to do is not just fix one part, but get all of these things moving together.”

“Quickly?” Considering the years of complaints, falling sales and stock price I’m not sure “quickly” is particularly accurate.

Just think. People who earn more money have more discretionary money to spend.

Rocket science? No, just logic.

But making your company look like a hero for paying people $18K a year definitely is rocket science.

Flickr image credit: mario

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