Feature Article

Overcompensated Leaders and Their Tools

According to the Institute for Policy Studies, American CEOs make 263 times the average compensation for American workers. The average pay for CEOs is eight times what it was in 1970 while American workers are taking home less in real weekly wages than they were in the 1970s.

Most Americans seem to be okay with that. A good number want to extend the tax cuts for these rich folks for reasons that escape me. And we all know the inequities will only continue to grow: The system for paying CEOs is broken beyond repair since the people in control of the system, who are the CEOs and their boardroom buddies, are the ones who benefit from it.

Randall Stephenson, the CEO of AT&T, made more than $20 million in 2009 while laying off around 12,000 people. Many Americans, including a good number of workers who are making less now than they or their parents did in 1970, seem to care more about protecting Mr. Stephenson’s right to earn and keep as much money as he can than about the 12,000 people who lost their jobs because of his management team’s incompetence. Verizon CEO Ivan Seidenberg only earned around $17 million in 2009 but he laid off more than 21,000 folks. William Weldon at Johnson & Johnson had total compensation in 2009 of $25,569,844 and his company laid off nearly 9,000 people.

These obscene compensation packages are only going to get more obscene but at some point, the workers who have been getting shafted…

Steve George | September 2nd, 2010 | Continued

About this Site

Steve George

Steve George founded Baldrige.com, the leading online community for Baldrige supporters, visitors interested in Baldrige, and anyone who wants to build a well-run organization.

Steve wrote his first award application in 1989 and has since worked with five Baldrige Award recipients, several state award winners, and dozens of other organizations including hospitals, manufacturers, service companies, small businesses, nonprofits, colleges, an army base, and a district court.

A trained Baldrige examiner in 1996, Steve has provided Baldrige training and written and edited Baldrige case studies.

He is also the author of four Baldrige-related books.

His goal for Baldrige.com is to build an online community for sharing information, answering questions, and promoting the Baldrige model as a proven approach to achieving performance excellence.

Imagine a world in which the organizations we buy from, supply, work for, and receive services from are well-run and high-performing. We aim to support that vision by providing:

Information You Need to Build the Organization You Want

Other Recent Articles

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Measuring Teacher Performance

A recent report that the Los Angeles public schools will start publishing test scores by individual teachers has touched of a storm of protest. The so-called value-added gauges are intended to provide data on how well teachers improve the test scores of their students over the course of a school year.

An academic report by the Economic Policy Institute argues that “the nonrandom assignment of students to classrooms and schools—and the wide variation in students’ experiences at home and at school—mean that teachers cannot be accurately judged against one another by their students’ test scores, even when efforts are made to control for student characteristics in statistical models.”

Although that makes a lot of sense, I understand where the push for value-added gauges comes from. As a parent, I’ve never felt that the effectiveness of my children’s teachers has been evaluated in any meaningful way. Average and incompetent teachers return, year after year, to inflict their ineptness on their students. Lacking any reportable measures of competence, they are unaccountable for their performance except as part of an aggregate school’s overall performance. Teachers need to be accountable for the quality of their work, but measuring that quality has been elusive.

The EPI report offers alternatives that rely less on test scores such as “systematic observation protocols with well-developed, research-based criteria to examine teaching,” but, as the report observes, “American public schools generally do a poor job of systematically developing and evaluating teachers.” And this is only getting worse as shrinking budgets cut funds needed for…

1Sep2010 | Steve George | 0 comments | Continued
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Trader Joe’s Secrets

Yes, they really are secrets. Trader Joe’s doesn’t divulge information about its management system or its strategies or its success. So Fortune spent two months talking to people who have worked for the company, competed against it, analyzed it, and supplied it (click here for article). This is what they found:

  • Trader Joe’s is roughly the same size as Whole Foods. It is owned by Germany’s Albrecht family but still managed by its founder.
  • The company is very selective about where it puts new stores. It’s only adding five locations this year. It looks at demographics to choose sites in places that fit its distribution infrastructure.
  • Trader Joe’s offers a limited selection of products. Typical grocery stores carry 50,000 SKUs; Trader Joe’s sells about 4,000, about 80% of which bear the store brand. “With greater turnover on a smaller number of items,” Fortune writes, “Trader Joe’s can buy large quantities and secure deep discounts. And it makes the whole business—from stocking shelves to checking out customers—much simpler.”
  • Trader Joe’s pays its suppliers on time without the extra charges for advertising, coupons, or slotting fees that other supermarkets charge.
  • The company buys directly from manufacturers that ship straight to Trader Joe’s distribution centers, which ship daily to stores. The stores don’t carry much inventory so ordering must be precise.
  • Store managers can make low six-figure incomes while full-time employees can start at half that, and Trader Joe’s annually contributes 15.4% of employee’s gross income to tax-deferred retirement accounts.
  • Trader Joe’s is becoming more corporate. As a former employee observed, “You…
31Aug2010 | Steve George | 0 comments | Continued
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Kano Satisfaction Model

A few years ago, I met Noriaki Kano at a hotel restaurant in St. Paul to talk about his famous satisfaction model that helped earn him a Deming Prize and ASQ Medals of Distinction. A retired professor, Kano still spoke about the evolution of his model with intensity and curiosity.

Kano Satisfaction ModelThe point of the Kano Satisfaction Model is that organizations need a profound understanding of their customers’ requirements to increase satisfaction and secure loyalty. Not all customer requirements are equal. The Baldrige Criteria ask: “How do you use customer, market, and product offering information to identify and anticipate key customer requirements and changing expectations and their relative importance to customers’ purchasing or relationship decisions?”According to Kano, “relative importance” can be characterized as basic, performance, and excitement.

Basic services or features do little to improve satisfaction unless they fail, in which case they can cause serious dissatisfaction. We expect the checkout lane in a store to move relatively quickly and without any problems. When it does, we don’t feel more satisfied with the store because that is what we expected. When it doesn’t, we feel frustrated and dissatisfied.

Performance services or features are those that produce customer satisfaction. If the store you are visiting is Wal-Mart and you get excited about paying the lowest prices, the signage showing great deals is a differentiable service. If you are shopping at Target, the wide and welcoming aisles and the quality of the merchandise may be differentiable services. Wal-Mart, Target, and other stores must be clear about…

30Aug2010 | Steve George | 0 comments | Continued
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Employee Hierarchy of Needs

Money isn’t everything, especially when it comes to motivating employees—but it’s also not irrelevant.

Chip Conley’s Joie de Vivre hotel chain in the San Francisco Bay area struggled after 9/11. In an interview on FastCompany’s Web site (click here), Conley talks about turning to Maslow’s hierarchy of needs pyramid to understand how to connect to the higher needs of employees, customers, and investors. He developed an employee pyramid with three basic themes: “survival at the base, succeed at the middle, and transformation at the top. Applying that to employees, it’s money, recognition, and meaning.”

Conley and his leaders worked on building a culture of recognition and meaning:

  • Senior leaders ended their meetings on a positive note.
  • They created an environment of recognition throughout the organization.
  • They made a rule that the person giving recognition needs to be from a different department than the person being recognized.
  • They added questions to the twice-annual work climate surveys measuring performance on the top-of-the-pyramid attributes.
  • They held offsite retreats with line level employees to promote recognition and instill meaning.
  • They measured relationships to help evaluate manager effectiveness.

Joie de Vivre’s focus on the employee pyramid seems to have produced results: It was named one of the top ten “Best Places to Work in the Bay Area for the fifth year in 2010.

One note of caution: Recognition and meaning cannot replace fair pay. Wages in this country have been stagnant for so long, and jobs are so hard to come by these days, that senior leaders seem to give little thought to increasing wages in…

26Aug2010 | Steve George | 0 comments | Continued
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How to Be the Best

Baldrige.com focuses on information that can help you build the organization you want. As a result, nearly all of the articles address elements that contribute to an excellent management system. This one is different: It looks at how you can become excellent at your heart’s desire.

In “Six Keys to Being Excellent at Anything” (HBR, August 24, 2010), Tony Schwartz quickly dismisses the myth that greatness is determined by our genetic inheritance. He analyzes current thinking about building personal capacity as well as his company’s experience working with executives to state that how hard we are willing to work determines our level of excellence. The minimum level of practice required to be expert in something, according to people who have studied this, seems to be 10,000 hours. That’s about seven years of practice at 4.5 hours per day, six days a week (this will make more sense when you read Tony’s list).

Schwartz offers six keys to achieving excellence:

  1. Pursue what you love. Passion “fuels focus, resilience, and perseverance.”
  2. Do the hardest work first. Great performers delay gratification and do the most difficult first.
  3. Practice intensely – for 90 minutes without interruption. Then take a break. And great performers practice no more than 4.5 hours a day.
  4. Seek expert feedback in intermittent doses. The feedback should be simple and precise.
  5. Take regular renewal breaks. Relaxing allows time to rejuvenate, metabolize, and embed learning.
  6. Ritualize practice. Build specific, inviolable times to practice. As Schwartz notes, “will and discipline are wildly overrated.”

I know a very successful leader who could have written…

24Aug2010 | Steve George | 0 comments | Continued
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Sustaining the Culture

Sustainability has become a major issue for organizations and leaders that want to sustain the positive changes they have made through programs such as Baldrige, lean, and Six Sigma, but the truth of the matter is that they can’t. Such programs often flounder as soon as new leadership takes over or priorities change or new ownership assumes control.

I’ve written about the impact of leadership changes in “Leadership Matters Most,” citing the example of AT&T Universal Card Services, which was launched using the Baldrige model, climbed to second in the U.S. credit card industry in just 30 months, and then changed leadership and dropped to eighth over the next 30 months.

In “Keep Your Eye on Process Improvement” (HBR, August 18, 2010), Brad Power recounts the story of Allied Signal, which used Six Sigma in the 1990s to produce 31 straight quarters of earnings-per-share growth of 13% or more. Leadership changed in 2000 and 18 months later, the Six Sigma culture had essentially disappeared.

Sustainability of the positive changes associated with Baldrige, lean, and Six Sigma is not difficult if leadership and ownership don’t change, but such changes are inevitable. CEOs move on, quit, or retire. Companies merge or are acquired. So the ultimate sustainability question is: How can we keep the transformation going after those who led it are gone?

I see two ways this can happen. The first is to replace the leaders of the transformation with new leaders who fully support it. If the CEO is replaced by the COO who was personally…

23Aug2010 | Steve George | 0 comments | Continued
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