How Much Should I Pay Myself, And How Much Should I Pay Others?

Here is the answer

You’re kidding? It took you seven years to implement the compensation structure that you felt would foster the right employee culture? Really, seven years?? But- you’re the boss!!
 
“Yup,” confirmed Dr. Leslie Braksick, an incredibly successful entrepreneur, CEO and executive coach. “We bought our company back, and when we did, with that original owner no longer in the picture, we instituted an employee stock ownership program that allowed everyone—every secretary, every assistant, every travel agent, every consultant—to be a shareholder of the firm …. It was important to me and my other co-founder.”
 

Bracksick’s story provides evidence as to the lightning-rod issue that surfaces for may entrepreneurs, executives and investors when they grapple with the question “how much should I pay myself, AND how much should I pay others?
 
For Braksick, the seven-year journey to answer this question began with a legitimate disagreement among herself, her co-founder and the third co-founder. The arduous journey included a sale of the company detour, in order to buy out a partner, and ended with the re-purchase of the company. This was all because two of the co-founders disagreed with the third over the important decision as to how deeply into the employee organization they should extend an equity incentive program. Braksick felt it was important to offer every employee the opportunity to share in the wealth creation that resulted from a successful business.
 
“My goal has always been to create a bigger pie. It’s hard-wired in me. I love creating the bigger pie. And I love to create wealth for many people.” In referring to the “bigger pie” Braksick and I talked about the compensation metaphor of a pie, where the CEO needs to decide how large of a slice to carve for her or his self, compared to how large of a piece to carve for other positions in an organization. This metaphor helps explore several important questions like “will a ‘fused’ culture of shared employee commitment (toward the organization’s purpose) result in a bigger pie?” And, “will the CEO make more money from a smaller slice of a bigger pie?” If this is true, then why do so many CEOs foster a compensation philosophy where they carve out a slice of pie that might be three, four or even dozens of times larger than the next highest compensated employee? For those who decide to serve themselves with such over-indulgence, what message does that communicate and how does that message impact the workforce culture of those in their charge?
 
While Braksick eventually got her way, it took seven years! And she explains that the co-founder who argued to restrict stock incentives to a smaller, executive-only group, was extremely smart and contributed enormous value to the success of their organization. This is not a good-guy/ bad-guy situation. It’s a legitimate, understandable difference of views among top-drawer professionals who all brought important skills and experience to the business.
 
Braksick shared her story in Fusion Leadership Unleashing The Movement of Monday Morning Enthusiasts. Fusion Leadership, as the name implies, explores the question of how to “fuse” employees together, building a high performance culture around a shared purpose or cause. Braksick, Chip Bergh (CEO of Levi Strauss & Co.) and six other leaders shed light on the specific question as to the behaviors of leadersand which behaviors “fuse” teams together around a shared purpose and how those behaviors differ from those that drive people away from an organization.
 
Answering the question about how much to pay one’s self is not about right and wrong (although there certainly are ethical aspects to this question). It’s about exceptional performance and answering this question creates a foundational component to the broader culture building process of “fusing” teams together. Fusion Leaders obsess over techniques to connect each member of their team to their organization’s purpose, citing compensation as a key tool in connecting those dots.
 
On the other hand, leaders who run over the top of their people, ignoring this question, while grabbing every nickel they can for themselves are often quick to defend their actions. Their argument goes something like this: my employees are making a fair trade, exchanging their time for our “market based” compensation. While that may explain the economic “trade” of time for money, it fails to answer the core question as to whether that leader is contributing to a culture of engaged employees or to a culture of “clock-punchers.” These leaders run the risk of alienating their teams and delivering the message that “you show up on Monday morning just to make me more powerful and more wealthy.” That message is clearly de-motivating and one that will drive people away from an organization and its purpose.
 
So what’s the answer? How much should you pay yourself (as the leader) and how much should you pay others? It’s simple- identify the amount of total compensation that (assuming everyone on your team knows the numbers) just begins to communicate that you are more interested in your personal wealth than you are in your organization's purpose. Once you calculate that amount, then award yourself a compensation package that adds up to one dollar less than that amount. With this tool, you can begin to answer the question “how much should I pay myself, AND how much should I pay others?”