Drive: a final word on compensation

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(this is part of on ongoing series on the book Drive, the Surprising Truth about What Motivates Us)

Before I tie up this initial series on Drive, I want to make a few comments about compensation. I’ve been noodling on this for a few weeks and talking to colleagues about it too.

Before I dive into compensation specifically, I want to re-emphasize that I love everything Drive says about autonomy, mastery and purpose. Yes, I have a couple quarrels about some of the specifics as you can read in my blogs on each, but overall, I think Pink is dead on that these are critical motivators for knowledge workers. Getting these right is more probably important than getting the financial rewards right, once you get past paying people well, which is the point of Pink’s book.

With that, my first comment is around the realities of “paying people well”. Pink sure makes that sound simple. Realistically, until a business is pretty large and mature (and maybe even then), it can be very challenging to implement a salary structure that takes money off the table. In most start up businesses, there must be an element of compensation that is at risk, not to motivate people, but to manage the company’s financial risks. I’ve seen consulting firms fall in to the trap of raising salaries too fast and then having unprofitable cycles that force them to lay people off or make short term choices that aren’t for the best of the company. Especially at companies where their biggest expense is salaries, like services companies, high salaries just do not seem like a wise business choice early on. Pink doesn’t address this at all, but I suspect he must be thinking of more established companies when he makes this argument about getting money off the table.

My next comment is about whether money is a positive or negative motivator. Pink asserts that it is actually a negative motivator for most people, once basic needs are met. Again, in a large company, maybe that could be true. But in my experience I have seen a couple of big exceptions:

  1. Measure-driven people. I’m not sure what to name this, but you know people like this – you may be a person like this – these are people who want a yardstick by which to measure their success. In Pink’s terminology, they want to know if they are approaching mastery. I’m one of these people, less so than earlier in my career, and I’ve known many (usually young) superstars who fit this mold as well. When it comes down to it, often one of the easiest ways to measure mastery is through financial measures. Consulting firms have widely varying compensation schemes from simple to elegant to grossly overly complex, but generally as you move up in your career, your compensation climbs. Perhaps the consultancies could get a lot more creative about coming up with other success measures, but the overall business’s success is measured around work sold and delivered, because that’s what drives growth and profit. So employees are naturally incented by their impact on these numbers and by default they are promoted and rewarded based on their influence on these numbers as well. This is true in tons of roles in big and small companies – sales people, P&L general managers, financial services advisors. It seems to me that separating how we measure success in an overall company from how we measure success in an individual is pretty unrealistic. 

    Sidenote: I’m a big believer in other measures than financial measures for any company (i.e. creating valuable products/ services, having happy customers and employees) and I would never want to work for a company that only emphasized financial results, but the fact is that that’s how our markets reward them so it remains pretty darn important.

  2. Business owners/ entrepreneurs. I know plenty of people who love building businesses, even if they aren’t primarily motivated by money. For them, it is more about the innovation, or the game of figuring out how to compete and build a successful company. Several of my colleagues fit this mold and I’d put myself in this camp too. When we do well as a business we reap financial rewards as partners in the company, but does that mean we are directly motivated by the financial rewards? I’d argue not – since any of us could make more money in the short term in other companies. Again, the financial results are one way to measure mastery. When the company is successful, short term and long term, we feel like we are approaching mastery. There are also many other ways we get to measure mastery, like coming up with a new piece of intellectual capital or helping a client implement a strategy successfully.

    Sidenote: As we were starting Thought Ensemble, I sat down with several very successful entrepreneurs to share our vision. I told them all about how we were going to go build the best intellectual capital … and write a book … and change the way consulting was done with our clients. I specifically said I didn’t want to pay any attention to revenues. All of them (and my business partner) set me straight. They emphasized that our ability to do everything else we need to do (get more clients, hire employees, invest internally) would be based on our success in driving financial results. A few years in I do acknowledge that my stance was a little naïve.

So this is getting a little long and I’m going to wrap up … while I love this book and the concepts it is built on, I am not on board with his stance on compensation. I think compensation can be a positive motivator and a direct measure of mastery, especially for certain types of people in certain types of companies.

Thoughts?