Compensation as a Strategic Asset

CHAPTER 4HOW TO GROW THE COMPENSATION PIE: THE MISSION/VISION/VALUES FACTOR

“Leadership is about change. It’s about taking people from where they are now to where they need to be. The best way to get people to venture into unknown terrain is to make it desirable by taking them there in their imaginations.”

—Noel M. Tichy

Firms that maximize profits usually have close alignment amongst mission, vision, values, strategy, and systems, especially the compensation system. If you are concerned at all about driving financial results in your firm, you will eventually need to align owner and employee compensation to the firm’s strategic initiatives.

Before we get into a discussion about tying compensation to the firm’s strategic initiatives, however, it is necessary to have a clear understanding of three critical components of the Organizational Effectiveness Cycle introduced in Chapter 3: mission, vision, and values.

Strategic alignment cannot be achieved unless owners and employees know what to align themselves with. That is why mission (why you exist), vision (where you are going), and core values (how you will treat each other along the way) are so critical to the strategic success of a firm and why they need to be considered when designing an effective compensation system. This is shown in Exhibit 4–1, “The Profitable Firm’s Foundation.”

This chapter discusses how a firm establishes its mission, vision, and values.

DETERMINING MISSION AND VISION

When we facilitate owner strategic planning ...