Guest Contributor, Robert Cannon: Are You an Outperforming Manager? Do You Pay for Performance?
April 15, 2012 1 Comment
A recent Financial Times article examined the performance of English football teams. In summary –
1) Their research concluded that 90% of football club performance can be tracked to the players. That is the salary level paid for these “employees”, whether it be at high NY Yankee level, or Oakland A’s low, can predict most of the success of the team.
2) That leaves 10% for the Manager’s effect. Some managers outperform, while some underperform, just like in the real economy.
I believe that this phenomenon exists in the realm of competitive business (after all most pro sports leagues operate in a type of Cartel arrangement). In any event, my conclusions would be:
A) The firm pays for positions and individuals, paying for the type of job and paying specifically for the employee and his/her skills to fill that position. It stands to reason that if the firm pay scale is average for your industry, you should expect no more or less than average performance, financially and customer-wise. Fully 90% of the result can be predicted here, that is if you pay more or less than average, the likelihood is that your financial results will reflect that spending. If you can afford to pay more, then the customer related performance and your related financial performance should go up.
B) Then again, in a small business environment, a very talented CEO can make much more than his/her 10% difference, through organization and drive lead an average crew to outperform it’s pay grade by a long shot.
Prescription – whether or not you are a good manager, you should hire talented people and pay-up for staff. Hiring well is your biggest and most effectual job.
Robert Cannon is a principal at Cannonomics Inc.