Culture + Compensation = Performance

business culture compensationThe Puget Sound Business Journal recently published a piece about Expeditors International and the number of leaders there who do not have degrees entitled “Performance, not Pedigree.” The philosophy of founder Pete Rose has created a culture where performance is rewarded above all else. The majority of the compensation comes from bonuses based on company performance so it would make sense that performance is the priority. Even the CEO only has a $100K annual salary, the rest of his income is all incentive-based.

How has this philosophy that has shaped their culture played out for Expeditors? Quite well as it turns out, revenues now exceed $7 billion. The founder has neither a high school nor college degree, but he had a vision which he executed well and in turn created opportunities for 13,000 employees worldwide. Every employee has the same opportunity that he created for himself. If you perform, you will rise in the ranks. If you have gumption, motivation, and drive, you can continue to do well for yourself by doing well for the company.

Essentially, he has created an entrepreneurial incubator and any employee wanting to play in it can. What I most love about the story of this company is how the absolute alignment of the vision, values and culture has created amazing results for employees and shareholders alike. It’s often assumed in organizations that you can have results for one or the other, but not both. I believe that giving employees the opportunity within a company to be entrepreneurial will produce results for both and Expeditors is a prime example of this happening.

How Does Your Compensation Work?

Take a look at your compensation packages for your employees and see how they align with your culture. Do you want employees to think more like owners but pay them like government employees where no matter what they do, they will not be rewarded? Do you have a standard pay range and no one can earn beyond it no matter what? When everyone is involved in achieving the company’s goals, you’ll have a much higher likelihood of getting there. When everyone is compensated as a result of achieving those goals, you will get there even faster. People perform when it’s personal, meaning when they feel personally involved and responsible for the outcomes you will get a different level of commitment and performance.

Not every business needs to mimic Expeditors, my point is that when alignment of vision, values and culture are present, performance usually goes up. When performance is one of the prime motivators rewarded appropriately it goes up exponentially. If Expeditors had said that they value performance above all else, but you must have a degree to reach a certain level, they would have instantly created a different culture. It would have been one of elitism and ceilings and “performance, but…” Fortunately, they did not. My guess is that most of those rising to the top through performance would at some point seek further education because to keep performing, you need to keep learning. Hats off to a company doing it right by creating an intentional culture based on performance.