Zen and the Art of Executive Compensation

Stickman Zen Garden

Stickman Zen Garden

More than 20 years ago, I visited Japan and spent time at the famous Ryoan-ji Zen Rock Garden in Kyoto (go to the 1:00 mark). The garden is considered a masterpiece of its form as well as an enigma. Little is known if its author had a specific reason for the rocks chosen or their positioning.  In fact, it isn’t known when or why the garden was created. There is no confusion about a single fact. It works. A great executive compensation program is like this garden in many ways. No single perspective will give you total insight. Even when things don’t change, you can always see something new. It speaks to many people while remaining frustrating for others who see something from a different viewpoint. Most importantly, a great executive pay program works.

The key to the garden is that it is far more about your state of mind and perspective than it is about the details. The simplicity that makes the garden so hypnotic masks the complexity of each element. Time must be taken to move past the surface and see the minute details that make it special. If the garden was made of featureless fake stones and perfectly manicured grass, its impact would be reduced or maybe even destroyed.

We work hard to create great compensation programs that appear simple. During this process we must be careful. We must not remove critical features that ensure long-term effectiveness or create a loss of a program’s current impact. Too often, we sand away too many of the rough edges that were created to ensure a program can weather tough times. We simplify and polish until the program can be understood in minutes and easily forgotten in hours.

Designing for someone not involved in the creation or upkeep is counterproductive. For centuries, historians and art critics, many from outside Japan, have provided a wide range of opinions on why each rock is positioned in its specific location. Scientists have analyzed the garden and its alignment with the temple’s architecture. One thing they all seem to agree, the rocks are where they are supposed to be for the garden to work properly. Another thing they agree on is nothing. They can only guess because they were not native to the experiences and decisions that drove the design.

We all know that creating an executive pay program that contains no explanation of why it was created or insight on how to accomplish its goals is a flawed concept. We must provide enough information to avoid 500 years of conjecture. But, a plan that is not entirely transparent may also be a good thing. Too much transparency and a program may lose what makes it special. Too much adherence to a process that makes it look like every other program may mean that no one sees it’s the uniqueness that makes it great. Like the visitors to the ancient Zen rock garden, those who evaluate our work must agree that when they try to dictate the exact form, the plan loses its essential uniqueness that invariable makes it work.

It’s all about balance, simplicity, complexity, transparency and mystery. Seems pretty straight-forward to me.

Ryōan-ji, Shinjitai: 竜安寺, Kyūjitai: 龍安寺?

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