Buddha CEO - Howard M. Cox (best book recommendations TXT) 📗

with anger. Condemn the crime, but not the criminal. Use the occasion to try to help the offender realize their mistakes.

The Responsibilities of the Employer

Buddha taught that the master should:

1. Assign work that is suitable for the team members abilities
2. Provide proper compensation
3. Care for them when they are ill
4. Share pleasant things with them
5. Provide them needed rest

This is basic HR manage101 from 2500 years ago. Still, it is amazing to me how often we violate these principles in everyday business life.

The Peter Principle

We routinely assign team members to tasks for which they are not well suited. We follow that mistake up with little ongoing support, training or encouragement. The epitome of this phenomenon is the Peter Principle.

The Peter Principle states that we generally promote someone to one organizational level beyond their competency and leave them there to flounder and create a dysfunctional organization in the process.

For example, if someone is a good front line production worker we promote them to a shift supervisor. We provide them with no training for these expanded responsibilities assuming if they are good at performing the core processes they will be good at supervising others who perform the same tasks.

Of course, nothing could be further from the trust. Once we see they are failing, they receive no more promotions or training, nor do we demote them back to their position of competency. We simply live with the dysfunction. In the process we lose our most productive doer and create levels of incompetent middle management.

Compensation Briefly

Compensation is a topic for its own subsection below. However, I will briefly say here that I think compensation systems rarely create strategic alignment of both the team member and organizational goals.

Care and Compassion

Many employers, especially in the small to middle market are very generous when it comes to seeing and helping tem members through hard times. However, this is hardly universal. There is no better way to instill trust and loyalty in your workplace than to stand behind your teammates when they need you most.

Sharing

Sharing pleasant things with your teammates and vendors can not be over emphasized. It is the principle we have stated in many sections of the book; little things can make a big difference.

The culture of your organization will be determined more by the small kindnesses, unexpected pats on the back and sincere thanks than any other single element of your overall compensation systems.

Rest for the Weary

Providing your troops with needed rest is another incredible opportunity to differentiate your organization and make you an employer of choice. Again, many companies do a respectable job here, but in general, we work way too hard in the American culture.

We do not provide enough paid vacation. We work too many hours with too few breaks for renewal. We provide too little time off to allow our team members to be engaged in their families’ lives and the community at large.

Adequate rest is good for business. It is the embodiment of the John Wooden principle of the need to have “fresh legs” in the fourth quarter when the game is on the line.

Compensation

As mentioned above, compensation is a mission critical alignment tool. Compensation includes all recognition and remuneration systems.

Show me the Money

Let’s start with monetary compensation systems. There are really four parts to this equation. The first is base salary and fringe benefits. These need to be set as appropriate for the position in the company in relation to industry norms and the experience and skills of the individual candidate. Many relevant factors come into play, not the least of which is the team member’s salary history.

Bonus systems

The second component of monetary compensation is the bonus system. Well structured bonus systems are driven by the attainment of both Company and departmental goals. At Mann Properties, we based year-end bonuses 50% on the attainment of Company goals and 50% on the results of individual profit center goals.

We constructed our system this way to be as fair as possible to both the Company and the individual team member. Obviously, from a shareholder perspective, Company wide goals are what really matters. However, it is possible for one profit center to have excelled vs. their goals and still have the overall Company results fall short of expectations.

Clearly, there is the wherewithal to pay concept and the overall Company results are what pays the bills at the end of the day. This is why 50% of the team member year-end bonus was calculated based on the overall Company goals.

At the same time, you want to reward individual profit center performance when possible, and this was the rationale for basing 50% of the year end bonus on just the individual profit center results vs. goals.

Both the Company and departmental goals that drove the bonus system were agreed to at the annual fall strategic planning retreat and were effective for the following calendar year.

Goals need to be realistic, yet stretch your team members to shoot for high growth and profitability goals. Even though you may have a 5 or ten year plan, you will not necessarily reach those goals in a linear fashion. For example, one of Mann Properties’ profit centers is residential land development. We experienced a boom year in 2005 followed by disappointments in 2006 and 2007.

We needed to find a balance between goals that were fair in 2007 for the shareholders in relation to the 10 year plan results we had promised them and goals that were realistically attainable given the market conditions for residential housing in 2007.

We decided as a compromise that we would use the original 10 year plan revenue goal for 2007 on the Company goals section of the bonus plan and a more realistic goal based on current economic conditions for the residential development profit center goal. In this way, every team member was held accountable to the shareholder’s expectations based on our ten year plan, but the residential unit’s team members were not set up for failure relative to their annual department goals for 2007.

Spot Bonuses

This is a term a stolen from Gerald Mann, the founder of Mann Properties. He used this concept at the engineering consulting and testing firm he owned before getting into the real estate business.

The basic idea is that you want your team member’s goals to be aligned with the shareholder’s goals. Therefore, you want your team members celebrating when your shareholder’s celebrate.

In addition, you want the reward for the team members to occur as close the celebrated event as possible. This ultimately creates a Pavlovian conditioning of the team members salivating over the same events as the shareholders.

For example, there are business events that really drive the success of the Company as a whole for each one of its profit centers individually.

For example, in the real estate industry such individual events for the leasing and sales team might be a new tenant signing a lease or a commercial land sale closing. When such events as these happen a monetary bonus would be paid to all of those involved, not just the brokers who are traditionally compensated for these transactions.

For the land acquisition team, wining might be defined by closing on the purchase of a new land opportunity they had championed. For the land development team, it might be bring a new residential community in on time and on budget. For the construction team, this could be completing the construction of a building on time and on budget. For the property management team, it might be tenant survey results that were above expectations or existing tenant lease renewals.

The spot bonus system is geared to celebrating wins for the shareholders with all the team members involved in the event causing the celebration. This ensures that everyone on that profit center team is aligned with and focused on the results that matter day to day.

Deferred Compensation

This is the fourth and last component to monetary compensation systems. This is generally reserved for senior executives.

One of the most popular vehicles for deferred compensation is the phantom stock plan. The essence of the plan is that it provides an equity ownership like incentive for non-equity owners.

I generally advise against including team members in the actual equity ownership of business. There are simply far too many things that can go wrong in business. Business divorces are no less frequent nor are they any less stressful than the marital variety.

Phantom stock plans basically provide a long-term supplemental retirement plan for senior executives based on the increase in the value of the Company over time. There is usually a long vesting period before you can actual leave the Company and take the money with you. This creates a virtual “Golden Handcuff” that makes it difficult for your senior executives to leave and go to work for competitors or start their own businesses.

In addition, the value at retirement is generally paid out over at least a ten year period to ease the cash flow drain to the Company at the retirement of a senior executive that had vested in the plan.

Recognition – Show me the Love!

Do not underestimate the power of non-monetary compensation in attracting and retaining key talent on your team. It has been said that people are more starved for recognition than they are food. In my experience this has certainly been true.

At Mann Properties, we had a formal recognition system that ranged from something as simple as what we called a “Thank You Mann” to prizes that we gave away at the quarterly employee wide meetings to recognize team members whose had exhibited performance “Above and Beyond” what was expected from them on a project during the previous quarter.

The “Thank You Mann” was a form one team member could fill out to recognize the assistance or support they received from another team member. The completed forms were displayed on a bulletin board in the kitchen along with news stories bout the Company, etc.

Non–monetary systems can also be informal, and those may have the most motivating impact of all. Examples would be the so called “Pat on the Back” that you give a team member in the simple form of a thank you for a job well done.

An example of a legendary informal non-monetary recognition system is the thank-you notes Ronald Regan would send out to Republican Party volunteers and supporters. He reportedly wrote and mailed five such cards every day. No wonder he was so popular with the party loyalists at election time.

Vendor (Supply Chain) Management

My opinion is that you should outsource everything you possibly can with the exception of vision, mission, values and strategy. External customers will always treat you better than internal customer. This business model keeps your fixed costs low and creates a lean mean value creation machine.


Expectation Management

As mentioned earlier, no margin no mission. You must create a higher than average return to your shareholders over time. However, to accomplish this you must focus on the long term and this necessitates