Choosing the Right Job
Why "Layering" Your Business is Important

CEOs, Motivation and Pay

A survey in the Guardian put being head of a major organisation – the CEO - as the best paid
job in Britain; and, interestingly, even being a 'senior local government official' ranked tenth. CEOs, then, have it – the best paid jobs. This despite the research from Eversheds which found – in a survey of 241 companies around the world between January 2007 and December 2009 – that there was no link between pay and stock price performance. In other words no link between the added value and the cost paid to acquire it by shareholders.

I have also had a fascinating debate on a Linkedin forum with the Managing Director of a consultancy producing 'research' results that demonstrate what the top CEOs of the big corporates excel in: results, strategy, taking risks, tenacity, legacy, people, communication, being resourceful, learning and self-knowledge. Phew! No wonder they earn their money – and thank God that we have such talented people running our companies, albeit it would appear their salaries are not commensurate with their share price achievements. Then, again, as I pointed out to the MD of the consultancy: is this really research about CEOs of companies or is this a dream list of competencies? Or, more likely, is this simply brilliant PR – those at the top banging on about the skills they must have to be at the
top, so we at least can stop worrying? Or, most likely of all, is this simply consultancy suck-up for future CEO work? Hey, we think you’re great!

Lucy Kellaway, the regular, brilliant and acerbic columnist of the Financial Times expressed things differently in her article in the Financial Times. She said, the three worst traits of CEOs were "a lack of self-knowledge, a lack of self-knowledge and a quite extraordinary willingness to give themselves the benefit of a doubt". Further, she went on to say: "I have spent 15 years studying them and common "sins" are: control freakery, dithering and bullying. They are also vain, poor listeners and afraid of conflict. Most can't even conduct a half decent conversation." So, so much for the 'learning', the 'communication', the 'self-knowledge'; I could go on, but I guess I would agree with the 'taking risks', especially where that appertains to other people's money – think banks.

The truth is that we must never forget the psychological reality of being human, particularly being a top dog human. What we need to be clear about is that everybody who reaches the top likes to believe they did it on merit, and then attempts to get facts to conform to this view. We are  conditioned to show respect to our superiors, our bosses, and as an employee it is difficult not to; but when this tendency spills out into public life, when deference is shown just because one is at the
top, no matter how half-baked the performance and the results, then one – the country – is in serious trouble. It is so easy to give examples of CEOs who were deified in the business press at the time, only to find their real achievements very different as the slow mills of time or God grind out their
true value: Sir Fred the Shred, Lord Safety-First Browne, Supermarkets led by Horse-Meat Eating CEOs now - and so on.

We note the titles, the formality and consolidation of their reputations even when the reputation
itself is in tatters. Two points immediately emerge: the first is obvious – that very few CEOs add real value to mammoth enterprises; that being smaller gives greater accountability, and allows more dynamic change if things are not going well. The quite recent strictures on the Energy cartel is a case in point – the six or so CEOS have all nicely cuddled up to give the consumer NOT the best deal. (And on that basis let me remind you of a favourite theme of mine: European political membership is voting for these cartels. The referendum if we get it is late in coming.)

Further, the honours system in this country that bakes these brittle and crusty pies that contain
little nutrition needs reforming. We need to be in this sense more American, more democratic in wanting success and achievement rather than titles and power. Bo Burlingham's brilliant book, Small Giants, gives a template on how that is achievable at least at the small business level.

And a great new book on Engagement by David Bowles and Cary Cooper’s latest book, The High Engagement Work Culture, Balancing Me and We, makes the point vividly that most CEOs are simply employees, not entrepreneurs – not Richard Branson or Steve Jobs – in other words, not people who create value or even have a vision to do so. They sign on to do a job and the next thing you know the whole organisation exists to feed their ego and their bank balance. As Bowles and Cooper point out: the ego is a psychological virus and like a computer virus it can entirely destroy the host organism. De-motivating or what?

Finally, whilst being a die-hard capitalist myself, and eschewing all forms of communism, I do see on
this salary issue that the pay is out of control, is socially divisive, and is not promoting capitalism but pure greed. And it saps the morale and motivation of ordinary people – the people who actually create the wealth, the business, and the country. I think it is the John Lewis Partnership in the UK that has the right idea: the pay of the CEO is capped at a relatively low multiple of the lowest paid member of staff (partner) and all get an equal percentage of the bonuses. In America, Bowles and Cooper cite John Mackey of Whole Foods who has capped his salary (and all executives in his company) at 19:1 to the average workers’ pay. This against the corporates who increased their multiple from 47 to 81 times the average  (not lowest) earnings of staff in recent years – and yet crucially without increasing the value of their company stock. (Bowles cites evidence in the USA
of 525 times greater!!!)

In his book Drive, Daniel Pink provided conclusive and irrefutable evidence that for all but the most
mechanical of tasks money – pay – was a demotivator in terms of performance. If people are working for money, especially at the top, then they are obviously running on empty, and their performance will ultimately reveal that. Isn’t time we nailed this money and motivation issue once and for all – if not for our countries, then at least for our future?

 

 

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