The Manager's Handbook

19Alignment Through Compensation

If you pick the right people and give them the opportunity to spread their wings, and then put compensation as a carrier behind it, you almost don't have to manage them.

—Jack Welch, former chairman and CEO of General Electric

When my son‐in‐law took a new job, he didn't receive a compensation increase—in fact, his commission upside dropped from 50% to 20%. Even though he'd worked for two large software companies and always finished at the top of his cohort, he decided to try a smaller, fast‐growing firm. Conventional wisdom would think that he'd be working less hard in his new position—after all, isn't that how incentive compensation works?

But typical of star employees, my son‐in‐law's motivation to work hard never came from his employer dangling money in front of him. When former Stanford faculty member Jim Collins launched the team of researchers that led to the book Good to Great, the researchers collected a mind‐bending 384 megabytes of data. Among their conclusions was the revelation that economic gains from compensation plans were not a factor in driving behavior:

We expected to find that changes in incentive systems, especially executive incentives, would be highly correlated with making the leap from good to great … [but] we found no systematic pattern.

If you have the right executives on the bus, they will do everything within their power to build a great company, not because of what they will “get” for it, but because they simply ...