Henry Mintzberg’s recent Wall Street Journal article regarding executive bonuses has brought forth some assertive and vocal commentary from Journal readership and those in our own Lean Community as well. Both the LeanBlog and Evolving Excellence present interesting and complementary points of view. I’d like to share my perspective on the issue.
A bonus - paid to the CEO or anyone else in the business - is nothing more and nothing less than a single component of a compensation package, which may also include base salary, paid-time-off, and various kinds of benefits and nice perks. Remember all those neat company cars GM, Ford and Chrysler used to (still do?) dole out free-of-charge to their “leaders.” And it’s no secret, of course, that any form of compensation is open to potential manipulation if a manager or executive and/or her cronies are less-than-ethical in how they conduct business. But why single out and demonize the bonus?
Because, let’s face it, compensation – yes, even bonuses – is what you receive in return for your labor on behalf of the organization which employs you. Some labor is more valuable to the organization, some less so. There are measurements and judgments involved in figuring this out at all levels up and down the organization chart. It’s pretty complex stuff, kind of like figuring out what the actual financial benefit of that last Kaizen event or Six Sigma project you completed REALLY was. How exact a science is that?
If we eliminate bonuses from the compensation package we’re still going to need some way of differentiating the value each individual contributes to the organization. Perhaps this can be accomplished via the salary mechanism, but this just implies a much wider range of salaries. And salaries present the disadvantage of being, typically, fixed for the duration of a year or so. Now of course we could make salaries variable, adjusting them periodically based on someone’s perception and interpretation of the value contribution for each individual. But if we get to that stage I’m thinking that all we’ve really accomplished is simply engage in word play, creating a fixed and “variable” component for salary. Sounds like a bonus to me.
No, the answer isn’t to demonize the bonus. It’s to create a more accurate and transparent way of measuring and valuing the contribution each individual – CEO, CFO, CMO, and anyone (everyone?) charged with making in impact on the business – makes to the organization, and then rewarding her for that contribution. This is the real challenge which needs to be addressed and, unfortunately, Mr. Mintzberg offers us no guidance in this area.
I’ve been in the executive search profession for about 20 years. And not one single new Lean Manager or Director, Operational Excellence VP, Chief Operating Officer or President I’ve ever recruited has neglected to ask me about my client’s bonus plan for the new positions they were undertaking.
Let him or her who has never expected or earned a bonus speak now, please. How about you?
And that’s the way I see it. Adam Zak
