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> Something like this experiment in setting salaries is only good if it makes recruiting/retaining/utilizing more effective. If you're doing it for any other re

> Something like this experiment in setting salaries is only good if it makes recruiting/retaining/utilizing more effective. If you're doing it for any other reason, you probably have the wrong priorities. I don't mean to be snarky, but, who are you to judge someone's priorities? The numbers and concepts you're talking about here, such as "a 0.1% improvement in A/R efficiency," are probably perfectly sound insights - if you're trying to optimize for revenue, profit, growth, etc. But it sounds like that's not his focus. It's really refreshing to see a company leader with this much humility and integrity, and one who seems to be a lot more concerned with the quality of life of his team than the company's bottom line. (I know that not all companies can realistically function this way, but I have a great appreciation for those that do. And if it all comes crashing down in a year then all you pragmatists can say I-told-you-so.)

rdl 13y ago
It is true people have different priorities -- I was assuming the set of "grow fast or die" priorities common to virtually all VC funded startups. If a business doesn't have that kind of external pressure, there is more flexibility, although I think it is universally true that for small companies, small percentage improvements are generally less meaningful than for big companies, and absolute amounts are more meaningful. It is totally valid in a non vc funded business to have a goal of "produce great income and lifestyle for the team" and "maximize the odds the business will be healthy in 20 years". In a VC funded business the general goal is to maximize expected return, which rewards high risk moonshots which may not pay off, but if they do pay off, will be huge.
- jamesmcbennett 13y ago
  Theory of Obliquity by Prof John Kay at Oxford is really interesting. In lay terms it suggests that if you choose to lose weight for example (the direct route), you are unlikely to succeed. Alternatively, if you choose to become a great cyclist, you are likely to lose weight, (the oblique route.) Prof. Kay uses ICI which was a leading pharma company in the UK to explain obliquity in business. In 1987 ICI's mission statement read 'we make awesome products and innovate new drugs where possible to do good.' (wasn't in those words, but that was the message.) In 1994, they changed their mission statement to 'we exist to increase shareholder value,' and dropped the rest. The company went bankrupt not long after. The oblique route resulted in one of the largest companies in their field with the highest shareholder value, the direct route resulted in bankruptcy, i.e. the absolute lowest shareholder value. Increasing shareholder value is only a motivation of the shareholders not surprisingly. Employees and customers have little interest in increasing shareholder value directly (unless they are significant shareholders) yet it is through motivating customers and employees that a company will grow and increase shareholder value the most. When longtime ICI employee Sir James Black (Nobel Prize Winner) was asked to change from making awesome drugs to pushing existing drugs on a roadshow to increase shareholder value, he left the company. He later created more blockbuster drugs in his new role, but not at ICI. Thus in VC funded and non-VC funded companies, I believe the goal should include to produce a great lifestyle for the team.
  - rdl 13y ago
    Interesting (and I agree with it in a lot of cases). I think it matters more for long-term goals which aren't emergencies, vs. emergencies. e.g. when you are on fire, you don't need much motivation to put out the fire, you just need to know that rolling around on the ground is more effective than waving your arms. For long term goals, indirect methods seem more relevant.
    - jamesmcbennett 13y ago
      Possibly, but that is just isolating the topic of motivation. A company with an indirect strategy with a world-changing mission and great corporate culture is likely to attract better talent in the first place which will perform better when on fire.
  - flurdy 13y ago
    Great article about John Kay on why successful business are also great companies as direct approach does not pay (sort of): http://www.telegraph.co.uk/finance/economics/7532933/Professor-John-Kay-on-why-the-direct-approach-doesnt-pay.html http://www.telegraph.co.uk/finance/economics/7532933/Profess...
  - galfarragem 13y ago
    Dale Carnegie in his book How to Win Friends and Influence People (1936) says exactly the same: "Fundamental Techniques in Handling People 3-Arouse in the other person an eager want."

rdl 13y ago

It is true people have different priorities -- I was assuming the set of "grow fast or die" priorities common to virtually all VC funded startups. If a business doesn't have that kind of external pressure, there is more flexibility, although I think it is universally true that for small companies, small percentage improvements are generally less meaningful than for big companies, and absolute amounts are more meaningful. It is totally valid in a non vc funded business to have a goal of "produce great income and lifestyle for the team" and "maximize the odds the business will be healthy in 20 years". In a VC funded business the general goal is to maximize expected return, which rewards high risk moonshots which may not pay off, but if they do pay off, will be huge.

jamesmcbennett 13y ago
Theory of Obliquity by Prof John Kay at Oxford is really interesting. In lay terms it suggests that if you choose to lose weight for example (the direct route), you are unlikely to succeed. Alternatively, if you choose to become a great cyclist, you are likely to lose weight, (the oblique route.) Prof. Kay uses ICI which was a leading pharma company in the UK to explain obliquity in business. In 1987 ICI's mission statement read 'we make awesome products and innovate new drugs where possible to do good.' (wasn't in those words, but that was the message.) In 1994, they changed their mission statement to 'we exist to increase shareholder value,' and dropped the rest. The company went bankrupt not long after. The oblique route resulted in one of the largest companies in their field with the highest shareholder value, the direct route resulted in bankruptcy, i.e. the absolute lowest shareholder value. Increasing shareholder value is only a motivation of the shareholders not surprisingly. Employees and customers have little interest in increasing shareholder value directly (unless they are significant shareholders) yet it is through motivating customers and employees that a company will grow and increase shareholder value the most. When longtime ICI employee Sir James Black (Nobel Prize Winner) was asked to change from making awesome drugs to pushing existing drugs on a roadshow to increase shareholder value, he left the company. He later created more blockbuster drugs in his new role, but not at ICI. Thus in VC funded and non-VC funded companies, I believe the goal should include to produce a great lifestyle for the team.
- rdl 13y ago
  Interesting (and I agree with it in a lot of cases). I think it matters more for long-term goals which aren't emergencies, vs. emergencies. e.g. when you are on fire, you don't need much motivation to put out the fire, you just need to know that rolling around on the ground is more effective than waving your arms. For long term goals, indirect methods seem more relevant.
  - jamesmcbennett 13y ago
    Possibly, but that is just isolating the topic of motivation. A company with an indirect strategy with a world-changing mission and great corporate culture is likely to attract better talent in the first place which will perform better when on fire.
- flurdy 13y ago
  Great article about John Kay on why successful business are also great companies as direct approach does not pay (sort of): http://www.telegraph.co.uk/finance/economics/7532933/Professor-John-Kay-on-why-the-direct-approach-doesnt-pay.html http://www.telegraph.co.uk/finance/economics/7532933/Profess...
- galfarragem 13y ago
  Dale Carnegie in his book How to Win Friends and Influence People (1936) says exactly the same: "Fundamental Techniques in Handling People 3-Arouse in the other person an eager want."