"Offer the World First and Money Second" - Understanding the power of compensation

Offer the World First and Money Second

Offer the World First and Money Second

My 16-month old nephew inspires today’s posting. The other day, while watching a video of him, I couldn’t help be amazed at the vastness o f
his world.  This is true both in physical space and size relative to
his little body. He lives in a small town in Nebraska, but it couldn’t
seem larger to him. I often envision him in twenty years.  This
seemingly large world will in fact turn out to be very small. Nearly
every adult male in his area works for the railroad or in some capacity
of agriculture. The physical space won’t change, but the world of
opportunity will become increasingly smaller.
 
This
reminds me of the time when I worked at a small service provider. In
addition to my assigned tasks, I found myself embracing every
opportunity around me to learn the industry and contribute to the
success of the company. For example, I found myself taking on such
endeavors as redesigning the company logo as well as producing the
company’s first report guide (200 pages of fun). Simultaneously, I was
learning about IT, security and the fastest way to stuff six pages into a
number ten-size envelope. I embraced every task as an opportunity to
learn, make mistakes, take chances and be accountable for parts of jobs
that extended beyond the scope of any job description. Best of all, I
was not alone in this. My colleagues all put in similar efforts. During
this time, my coworkers and I were earning far less than others working
in our industry. In fact, the company’s first employee bonuses weren’t
paid until our third year of operation and the top recipient received
$1,000!  Yet we could not have felt more gratification for the work
being done.

I never learned more.  My world was never bigger.

A
few years later the company had been acquired for the second time. 
After the first acquisition I asked for and received a large raise.
After the second acquisition I received a nice chunk of equity. While my
pay was growing my world was shrinking. I was no longer able to create
logos; there was a department of people in a separate building
responsible for marketing. I could no longer grab a few people after
work and brainstorm on a holistic solution to the day’s grand problem.
Everything had been compartmentalized and while many were now
responsible for something, very few were accountable for anything. It is
probably not a coincidence that the equity I received after the second
acquisition eventually expired without me making a dime. It was a
perfect example of a big company offering a small world.

I never earned more. My world was never smaller.

The
small company ran well, but it barely made a profit. Although the
company just squeaked by each year, it redefined an industry. In fact,  a
large percentage of the company’s original employees have gone on to
run their own successful businesses in that industry. When I have an
opportunity to speak with any one of them, they continue to speak
fondly, almost longingly, of the days when we made almost no money, but
the world was at our fingertips. As a result, the company grew, the
employees grew and the owners made millions.

The big company that
our small company became a part of also ran well.  It still makes
billions of dollars annually. I often speak with people from this
company as well. (It should be noted that the two groups are almost
mutually exclusive.) The employees who were at the big company years ago
have mainly stayed there. The exceptions are generally victims of the
almost annual layoffs. The survivors still moan about compensation and
bonuses even though their income dwarfs even the CEO's pay from the
small company; few of them seem truly happy. Their world is a ladder
under a narrow spotlight with rungs that are too far apart for most to
reach. 

The behavioral psychologist, Abraham Maslow has been
quoted: “If the only tool you have is a hammer, you tend to see every
problem as
a nail.” We often hear that money is not the strongest motivating
factor for employees. But when your only tool is compensation, you tend
to look at every problem as pay-related. We tend to offer more
innovative and expensive ways to entice people to stay in their little
world. We augment this with more information, recognition programs and
clearer paths to job advancement.

I am not suggesting that any of these
things is wrong. I am simply suggesting that we try and offer them the
world first and money second.

Dan Walter is based in San Francisco, CA and is the President and CEO of Performensation
an independent compensation consulting firm focused on the needs of
companies not in the Fortune 1000. Dan’s unique perspective and
expertise includes equity compensation, executive programs,
performance-based pay and talent management issues, Dan is on the board
of the National Center for Employee Ownership, helps create ShareComp, a virtual conference addressing equity compensation and founded Equity Compensation Experts
a free networking group with more than 1,100 members. Dan is also in
high demand as dynamic and humorous speaker at events around the U.S.
Connect with him on LinkedIn or follow him on Twitter @performensation.