Vlog 46 featuring Steve Denning on C-level overcompensation

Happiness makes people get up in the morning and looking forward to a day at work. Hapiness makes a customer return to you when in need of help or support. So, measuring this happiness is really important. Measuring happiness can be done by using the happiness metric. The first time I read about it was in a blog by Jeff Sutherland, referring to the work of Henrik Kniberg. In this interview with Steve Denning I discuss the relation between happiness and compensation.

Happiness is much more important then you often might think. Especially when we look at senior management compensation, at the exorbitant salaries we read in the papers. We often forget the impact on employee or customer happiness. It is very difficult to ensure the happiness of your employees or customers when such extreme sums of money are being paid. Everybody might be fully happy with their work, the customers might be fully happy with your service, still if people feel that there is ‘unfairness in the air’ it directly impacts their happiness. And this impact will be negative.

Imagine when you are being paid a fair salary but your CEO earns more than 1.000 times more. Is his or her job 1.000 times more complicated? Is his or her work 1.000 times harder? I don’t think so. In fact, the bandwidth of salaries has a direct impact on happiness. The use of money as a motivator in the work place is to give people a fair pay, so they stop thinking about the money and they start thinking about the work. However, if their boss gets paid way too much, they are thinking about the money again, directly influencing their happiness. And that is understandable.

So, if you look to the future.  What should companies do? I don’t know the exact numbers yet, but when you are working at C-level and you earn more than 100 times the amount of money than the people (your colleagues!!) that do the actual work in your company, you created yourself a problem.

So, look at this bandwidth. Work on it. Make sure that the bandwidth is fair. Make sure that there is a fair difference between the people that have the lowest pay and the ones with the highest. Because when this is fair, people can get fully happy with the work and don’t have to worry about the money.

My take away from the interview with Steve Denning is that happiness entails much more than customer delightment alone. It’s also the happiness of your people. Don’t underestimate the negative impact of board level overcompensation. In time, unhappiness will bite you in the back. You can bet on that!