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|In: Leadership|Last Updated:

Poor Joe Torre.

George Steinbrenner’s offer would allow most Americans to retire in comfort after a single year of work. Add the incentive payment for success and their children could retire too.

Torre was, he said, “insulted” Steinbrenner wanted to connect his pay to his performance. (He didn’t, of course, phrase it quite that way.)

Not that I’m siding with Steinbrenner. I have a firm policy: When rich people negotiate, I don’t choose sides. Joe, George, anyone else in this position: Don’t tell me how unfair the other party was. Don’t tell me about the other side’s greed. Don’t tell me you’re insulted, hurt, generous, undemanding, or anything else.

Stop complaining in public — it’s undignified, serves no purpose, and annoys everyone. You negotiated and didn’t get what you wanted. Grow up and shut up. Nobody cares.

While we’re at it … could we have less complaining about what players earn? They might not do anything important. They might look more like employees than executives or investors. They did, on the other hand, work very hard to reach the top of their craft, and negotiated well. Not my business either.

Ridiculing Accenture for choosing Tiger Woods as its non sequitorial celebrity symbol is, on the other hand, just fine.

Getting back to compensation, it’s a dental subject for executives — necessary, but not today, thanks. Compensation is to employee relations what service levels are to IT/Business relations. Just as the only uptime business users find truly satisfactory is Always, the only compensation employees will ever find truly satisfactory is More.

It’s the American way.

This is as good as it gets: Compensation that is fair, easy to understand, consistent with your priorities, and not a performance disincentive. To achieve this, build it from four building blocks: The base (what you pay for showing up), promotions, variable compensation, and spot bonuses. Each has a different role to play:

Base: For each employee there’s a theoretically perfect base. That’s the magic number where the employee has no economic incentive to leave and you don’t have an economic incentive to find a replacement.

Earth being a stochastic realm, the “perfect” theoretical wage is more of a blur than a point, but that’s okay. Replace “no economic incentive” with “more inconvenient than it’s worth” and you’re close enough.

The base has nothing to do with performance or value, only the labor market. Adjust each position’s range every year according to what the market dictates. Adjust each employee’s position within that range, based on increased knowledge, ability and skills.

Promotions: When an employee demonstrates the ability to perform a more demanding job, someone else will pay them to do so. It’s time for a promotion — a different role, which means a different range, and a different position in the range. Fail to promote and you’re no longer near the theoretically perfect base rate.

Variable compensation: This is the magic buzzword for the annual bonus. It’s called “variable” compensation because it varies each year depending on how each individual employee performed that year.

Variable compensation is a good news/better news situation. The good news: You can make variable compensation enough to be meaningful — something you can’t do with wage adjustments.

When you recognize performance by giving an employee a raise, you might manage a 7% increase for a top performer. For a $75,000-a-year employee, that means $40 a week more cash than average workers get who receive the standard 3% inflationary increase. Big deal.

That’s how it looks to the employee. This one raise will cost the company $25,000, (assuming the employee stays ten years and discounting the cash flows) whether or not the employee continues to be a top performer.

Instead of a raise, give your top performer the same 3% inflationary wage increase you give everyone else … and a $20,000 bonus. Even after taxes that translates to something like $12,000 in cash. That’s serious money to most employees (the good news), and it saves the company $5,000 (the better news).

Spot bonuses: If an employee goes above and beyond, it’s an event, and it deserves recognition. Write a check, and do it right away. Reserve spot bonuses for exceptional contributions, not merely for successes. Otherwise they’ll become entitlements — ignored when they happen, resented when they don’t.

Fair compensation isn’t all that hard to do. In principle. The details — figuring out the market range for each position, and where to place each employee in that range — are where it’s hard.

But of course, the details are always what’s hard.

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|In: Industry Commentary|Last Updated:

Thoughts from an Oregon vacation:

Experts experience a different world (1): In Sideways, Miles and Maya (Paul Giamatti and Virginia Madsen) have a deep, touching conversation about Pinot Noir. They sipped their wine and envisioned the work of growing the grapes, the weather, the scenery, the vintner’s technique … entire vicarious lives.

I experienced flavor.

Relevant IT insight: When non-technical managers overhear a conversation between two engineers and have no idea what’s being said, many shake their heads and roll their eyes. They should be delighted.

Experts experience a different world (2): When you tour wineries you mostly taste young wines — in our case, 2006 vintages. A young Pinot Noir really doesn’t taste very good to a palette as unsophisticated as mine.

A wine connoisseur can taste a 2006 Pinot Noir and predict when it will be ready to drink and what it will taste like … and enjoy the future flavor now. Great vintners taste the grapes and know how to create that flavor.

Relevant IT insight: By the end of the design phase of any systems effort, at least one person in IT, and another in each affected area of the business, must be able to envision the experience of using the future system. Otherwise, while the new system might meet all requirements and specifications, it will still be a mess.

What you like and what you should ask for aren’t always the same: My wife and I generally prefer red wines. As most of the wines were quite young, the whites were far more enjoyable.

Relevant IT insight: When making management choices, what you like doesn’t matter at all. Base your choices on what the situation calls for. Anything else is your ego at work.

You can’t optimize for everything: Joe and Shari Lobenstein — the proprietors of Lobenhaus, our wine country Bed and Breakfast (highly recommended) — also grow a small grape crop. Joe invited us to taste his Riesling and Pinot Noir grapes, which were ready to harvest.

The flavor was astonishing compared to supermarket grapes. So were the seeds, which make up a lot of these grapes.

It’s too bad, but you can’t get the flavor without the seeds.

Relevant IT insight: IT optimization also involves trade-offs. Move to a higher-bandwidth technology and you might find you’ve increased latency to unacceptable levels. Adopt a highly scalable process and you’ll likely find you’ve increased overhead costs, reducing your flexibility.

And so on.

The outside view tells you little about the inside view: You can only taste so much wine, so we spent an afternoon at the Evergreen Aviation & Space Museum, the final resting place of Howard Hughes’ legendary “Spruce Goose.”

From the outside it looks like a very big airplane. When you enter and look the length of it, enormous looks small in comparison.

Relevance to IT: For business management, the experience is features and functionality. For business users, the experience is the user interface. Both are important. Neither provides useful information about what a system looks like from the inside.

But you already knew that.

Sometimes, what you get is better than what you’d planned: One of the exhibits was a Boeing B17G Flying Fortress — the workhorse bomber of World War II.

Bill Jarvis, the volunteer who showed us around the B17, piloted 30 missions over Germany in WWII, starting when he was 18-and-a-half years old.

On Bill’s last mission the Germans finally shot him down. He crash-landed in a sugar beet field in Luxemburg. Allied troops immediately took the entire crew prisoner, not sure if they were really Americans or were Germans trained to infiltrate.

After weeks of imprisonment and interrogation, Bill finally had enough. He told the MPs, in terms that weren’t uncertain and were laced with every cuss word he could think of, that he was going to see the General and they’d just have to shoot him if they wanted to stop him.

When he swore at the General in similar terms, the General concluded he had to be an American — no German could have had such a colorful vocabulary — and freed Bill and his crew.

Bill’s story is too long for this space, so you’ll just have to visit him at Evergreen. He says about half of it is true, but he can’t recall which half.

We’d planned to admire airplanes. Our best experience was talking to a World War II pilot.

Relevance to IT: In the end, technology and process are never as interesting or as important as the people who use them.

But you already knew that, too.

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