As a LeanThinker I am most unabashedly a free market advocate. Free trade, absolutely. Love those imported fresh Mexican tomatoes in my sandwich on a freezing January day. Open skies, no question. I look forward to when I can fly Singapore Air from Chicago to LAX, experiencing the same outrageously great service they provide on some of my international trips. And Brazilian ethanol - bring it on over! Let’s keep Illinois corn right here in the Midwest where it belongs, fattening up that great-tasting Midwestern beef I’ll be having for dinner tonight.
But Lean Leaders cannot allow a purely free market to exist in executive compensation when CEOs of certain American companies are receiving taxpayer (spelled: MY) dollars via U.S. government welfare handouts!
LEAN is about performance. And rewards, any way you’d like to define them, should go to those who perform well. And those who do not deliver performance should also receive a strong message: NO rewards. President Barack Obama was quoted earlier this week in the New York Times:
“This is America,” Mr. Obama said on Wednesday. “We don’t disparage wealth. We don’t begrudge anybody for achieving success. And we believe that success should be rewarded. But what gets people upset — and rightfully so — are executives being rewarded for failure. Especially when those rewards are subsidized by U.S. taxpayers.”
So let’s silently visualize the news headlines of the past few of months. Are you thinking of a company or two that has failed miserably in the market place? Even if you can’t remember the CEO’s name? We all know about at least some of these folks (though we may not yet know ALL of them).
Now, think for a moment about some of the concepts which define LEAN performance-driven companies, and see if any of these all-star concrete-heads (automotive, financial services, transportation, etc.) looking for a hand-out could ever be connected with ANY one of these principles or practices.
Leadership? Value-added activity? Accountability? Employee engagement? Respect for people? High quality, fewer defects? Flow (well, I guess there was some cash out-flow in the form of toxic mortgages, but that doesn’t count)? Customer value? Continuous or constant improvement? Lower cost? Going to Gemba (as in, knowing what the hell is going on in my business)? Corporate social responsibility? Transparency? And how about just good old-fashioned plain honesty?
See many (LEAN) connections? Neither did I. Many of our “modern” executive compensation systems are built around rewards and incentives that simply don’t do what they were supposed to do. That in itself is a performance issue, and a topic for another day. I’m sure we could apply loads of LEAN improvement strategies and practices in the compensation arena. But how about doing something right now?
Solutions? Well, I’m not an economist and I’m not a political activist, but I’ve sure met a lot of top-performing executives who’ve gotten LEAN religion, then transformed their organizations and their corporate cultures. And then delivered performance, and been well-rewarded for it.
So in the spirit of LEAN I offer a simple suggestion which can be implemented right now: Every company receiving assistance in the form of our tax dollars MUST send its Chairman, CEO, CFO and all business unit (division, subsidiary, etc.) leaders to an intensive (say 3-5 days, perhaps 10 for the CFO) hands-on LEAN EXECUTIVE training.
I’ve got a short list of appropriate Senseis in case anyone’s interested.
You are exactly right in suggesting that pay must be connected to excellence in performance. Moreover, there may be another perspective to consider when deciding what is the appropriate compensation.
Somehow there is this ingrained notion in our society that Bankers (or CEOs of most financial companies for that matter) provide a valuable service and hence they should be compensated with fat paychecks!!
But do they provide such a valuable service? One may argue that banks do NOT add wealth to a society. Of course they provide financing to organizations who then proceed to provide a product or a service to others in a society. These organizations directly create wealth. At best the banks’ contribution to the society is very indirect.
If so, shouldn’t one consider this factor as well.
And of course, I do agree that these CEOs should also exhibit that they are adopting practices that will improve overall governance – by addressing effectiveness (for customers and stakeholders), efficiency (for stakeholders) and compliance (for regulators and stakeholders).
Superior governance requires focus on ALL three – effectiveness, efficiency as well as compliance. Often people equate compliance with governance – an urban myth.
And yes, this ultimately implies focus on improvement of fundamental business processes through various means, Lean included.
As a Lean consultant for 15 years and former Director of HR I must point out these compensation systems do exactly what they are designed to do with tthe help of compliant boards and fawning compensation consultants pointing how how the CEO compensation is near or below the ever rising mean of all other CEOs compensation. In my opinion this is more a question of values not value add. Too many executives see themselves as almost separate from the businesses they manage. From their perspective they are paid for analysis, strategy and structural changes. If it doesn’t work out, too bad, it is not their fault, its the fault of those assigned to execute or some fluke in the marketplace. Their brilliance deserves its own reward. If you don’t have an Executive willing to learn and admit they are a critical part of the system transformation, your executive training will be nothing more than pearls before swine (more waste).