Last week we profiled an interesting article over at the Wall Street Journal outlining the cafeteria style compensation plan of Skyline Construction, which allows eligible employees to pick their own salaries, within a specified range. The catch: Choosing a lower salary means a shot at a larger bonus.
It's like Vegas without the free drinks. And a whole lot more accountability.
We had some good dialog in the comments and were fortunate enough to have the CEO of Skyline, David Hayes, check in with clarification on some points the article didn't have a chance to make, as well as more detail in his philosophy on rolling it out. Here are his notes (with his permission) for the readers of the HR Capitalist:
"Hello Everyone,
As CEO of Skyline, I’d like to comment on all of the above (see comments and original post).
First, let me say that no comp plan is the perfect solution. I worked at a Fortune 500 firm for 12 years and had some horrible experiences related to compensation, which ultimately made me leave. At that particular firm, base salary ranges were the same for each job category and all bonus was discretionary. Even after producing more profit and sales than any of my coworkers in the same job category, I was rewarded with a bonus slightly above others and less then some senior people who had more tenure. I got the "oh junior, your day will come, relax." Talk about a buzz kill!
When I became CEO of Skyline, I knew I could not satisfy all of the people all of the time. Instead, I needed to make a cultural commitment that I believed in passionately. Being an interior construction firm in San Francisco is not unique. There's little barrier to entry and lots of competition. The quest became, "how do I develop a unique culture to create a superior client experience and have highly motivated people pushing that commitment"?
I decided on the following structure:
• Equity stake in the company performance for everyone (we’re an ESOP)
• Incentive based compensation that was measurable and tied into profit, client satisfaction and other key performance indicators
• Open book management to teach each employee what it really costs to run a business
• Have the people who do the work, develop the strategic plan based on the ultimate mission and goals
Implement, watch, learn, adjust and implement again. After 40 months, we’re in the “implement again” stage.
On the compensation plan: many of your points are right on the mark. Candidly, the peer pressure to comply with the group is there, is on purpose, and is working. With so many competitors in our marketplace, employees who don’t like it have many excellent firms to go work for who will pay them the same salary. However, the statement about higher salary selection employees being coasters or weak, is unfair. Those choices are usually made by employees who just purchased a new home, started a family, have a spouse that is not working, had some personal health challenges that impacted their time at work, etc. We have had employees who made the high salary choice who did "coast" and guess what? The peer pressure to perform was brutal and they left for a competitor. It has happened twice in the last 3 years. That's okay by us. We are who we are and not for everyone.
Finally, as a former college athlete who played on a team, this is anything but "anti team". In fact, it is pro team. A team consists of individuals committed to the same goal, using their individual talents to contribute to the team’s success. Great teams are not always the best players but the players who bring out the best in each person, thus making the power of many better then the power of each individual.
I hope this helps, and I really appreciate all the intelligent discussion around this topic!"
David - thanks for checking in. Good to hear more depth about your program, and while we can all extrapolate how it would work in our environments, you're living it and to be commended for taking chances with how you motivate and compensate!
Hope you have a chance to check in often and join the discussion!
note for David. How refreshing to have an intelligent conversation about compensation plans and employee strategy. Wherever your strategy takes you, it is excellent to see real depth of thinking. Sweet!
Posted by: Meg Bear | July 16, 2008 at 09:16 AM