When KISS becomes WISH - Understanding Compensation


When KISS becomes WISH - Understanding Compensation

We have all heard of the KISS (Keep It Simple Stupid) principle, but when does KISS become a WISH (When Is Simple Harmful)?  Think about the color-coding at U.S. Airports. The Homeland Security Advisory Systems has been the “HIGH” threat-level orange since shortly after the color-coding system went into place. However, how many people know what the orange level really represents?  There is a level indicated by the color red above it and yellow, green and blue levels below it. The simplicity of this security advisory is obvious, but does it actually mean anything to you? Sometimes in our attempt to make things simple, the result ends up communicating neither intent nor purpose. I observe this with compensation plans all the time. As professionals, we work hard to remove complexity. We often end up with a program that does not perform as intended. It may be that the program lacks passion. Or, it may not support the complexity of the organization. And, sometimes, if we’re not careful, these plans can even end up sounding condescending. Whatever the result, we must constantly be evaluating whether the effectiveness has been simplified right out of the program.

A great example is multinational equity plans. Many companies roll out “global” plans that are essentially identical for every participant, no matter where they are in the world. Some go so far as to give the same value or number of shares regardless of job location. Others give the same percentage of pay in equity even when that means a tiny number of shares vesting over multiple years. Simplicity as a goal is admirable, but the outcome can be equity grants with disproportionately high values in some parts of the world or grants with so few shares that they have no impact at all.

This is where you have to balance the KISS with WISH principles. Simple is essential. However, too simple becomes incomprehensible. Think again about the threat level system. What would it take for the threat level to move to blue? Is it even possible?  If not, then the level represents the unattainable and serves no purpose at all. How would your life change if the level went to green? If everyone interprets the green level differently, then it has little or no value. If we understood what was meant by the orange “High Risk of Terrorist Attacks” the other levels would also make more sense. It would be best if each level was explained in detail on a regular basis. That way we would maintain the same meaning as facts and circumstances changed.

Compensation plans, performance management scores and pay ranges have the potential for similar results. A great quote is from former US Poet Laureate Howard Nemerov: “A teacher is someone who never says anything once.”  Instead of making plans overly simplistic, make them straightforward and relatable to your staff.  Take the time to educate rather than just communicate. Remember a “WISH” is an aspiration not a reality, while a KISS is something tangible that most people understand and enjoy.

Communicate and celebrate context and complexity. Your plan is more than a simple color or score. Give your staff and their efforts the respect earned.  Otherwise, focusing on simplicity for simplicity’s sake may cause more harm than good.

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