Performance-based Pay Packages?

Monday, August 6, 2007 at 7:00pm by Site Administrator

Bwah ha ha ha ha ha ha ha. Disgraced ex-Home Depot CEO Robert Nardelli has been hired by Chrysler to bring it back to financial health. Oh ha ha ha. Is it April 1st already? Didn’t Nardelli basically damage Home Depot and take a huge severance package for his “good” work?

Here’s a tip, Chrysler: ditch Nardelli now. If you don’t, you can’t be too serious about gaining financial health. It’ll only cost you several million for his non-performance, but you can hire someone more capable that’d be willing to take a $1 salary, plus performance bonuses. And that’s real performance, not what Nardelli imagines in his head. Or are you that desperate to have someone that screwed Home Depot?

A note to new entrepreneurs… Being successful doesn’t mean you have to hoard your profits. Don’t be afraid to institute pay-for-performance compensation for your top employees. Here are a few simple reasons for doing so:

  1. Opportunity for select employees to increase pay based on results. Not everyone feels comfortable with this, but those who do are very likely to over-perform.
  2. You’re not stuck with a huge payroll and no profits to show for it.
  3. If you go public, you already show accountability. VCs might also favor such organizations.

Need more reasons than that? Maybe fewer companies would go under if this sort of pay scheme were more widely implemented. You just have to be sure to quantize the necessary performance. One boss of mine promise me a raise if I could save the company a million dollars. I created a CMS (Content Management System) for 20 worldwide divisions to be able to create and manage their own web pages. I also stayed late past work hours to teach each region’s PR or web person how to use the CMS. I then showed my boss how this saved a million. Did I get a raise? Of course not, because this boss had a do-nothing motto.

What do you think? Should more entrepreneurs offer performance-based payment packages? Agree? Disagree?

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