Manager bonuses: Daimler steals the monkeys' coconuts

Daimler puts a stop to self-serving motives in leadership: The company's results become the measure of all things. Well done!

At Daimler, the signs continue to point towards change. As recently revealed, the company plans to link performance incentives for its executives more closely to the company's results in the future. "We simply no longer want to have the often lengthy discussions about whether someone has achieved 100, 110, or 115 percent of the target," was quoted Wilfried Porth, head of human resources. "If the company is not successful, then the discussion about personal goal achievement is of no use to us." The bonuses, the Corporate Monkeys' favorite coconut, will probably not fall as easily from the tree as before. Instead of focusing on the self-serving incentive tied to individual targets, executives are expected to concentrate more on leading their teams. Daimler again? Just in November, I highlighted Dieter Zetsche's initiative to place more trust in employees and less in rigid hierarchies as part of the "Leadership 2020" program. Has Daimler seen the future of leadership? The current announcements suggest so. Questioning the willingness of employees' performance by leadership has been a continuous issue in the business world. However, this pattern is gradually changing: Today, it is increasingly the gatekeeper who questions the leadership's performance capability. This paradigm shift in the performance debate is mainly reflected in one issue: manager bonuses, which give the impression of a two-tier society in our companies, where leadership and employees seem to follow very different interests. It seems only logical that Daimler is tackling self-serving motives.

New Freedoms in Leadership for Better Maneuverability

The new approach of not linking performance incentives to individual targets, but to the company's results, is a sign of the times: Executives who are supposed to focus on innovation and inspiration need more freedoms. These freedoms can only be gained if executives also grant their teams greater autonomy – in the form of more decision-making and action freedoms for the customer, but also in the form of the increased responsibility that comes with it. The old command structures may serve their purpose on a monstrous old frigate with thousands of crew members. However, the more a company resembles a fleet of speedboats with many crews, i.e., small, self-steered units, the less sense the rigid chain of command makes – and the associated performance incentives completely tied to the leader's target. It is clear that the Corporate Monkeys (a.k.a. COMOs) among the executives, with their love for the coconut, want to defend the old system. However, when it comes to getting everyone to think in the company's interest and pull together, new incentives are needed. For example: new freedoms. For everyone, not just for the bonus-spoiled COMOs.

It's About the Decisions – Not Who Makes Them

In most companies, the result is no longer visible due to the multitude of goals. There are various individual goals, but no one overseeing and managing these individual goals from a bird's eye view in a meaningful way and effectively preventing conflicts of interest. Therefore, in reality, individual target specifications often work against each other. Controlling has different goals than sales. One department wants to outdo the other. COMO managers even personally compete against each other on the narrow rungs of the internal career ladder. Often, not only do the goals not align, but the departments or individual managers also compare themselves to each other and, therefore, work against each other instead of towards the one big goal: the company's results. These friction losses waste energy – not to mention resources. When leadership is more focused on their own coconut rather than the company's results, there is something wrong with how we lead. Daimler is, in my view, responding to this to more effectively harness the potentials of leadership and the energies of employees. More freedom in leadership does not make it diffuse but, on the contrary, ensures more focus on the output. Today, we evaluate everything from engagement (often confused with ambitions) to employee satisfaction. Some of it is justified, but much of it is not. Only the overarching result of the entire company has the least impact on the immediate leadership work in the individual units. The more directly each leader and even each employee are connected to the one big goal, the better.

The Most Important Task in Leadership is Inspiration

Dieter Zetsche's announcement to place more trust in employees in the future – more freedom and responsibility for individuals – also hits the same note. At first glance, this may not seem related to the bonus issue, but the idea follows the same goal: the closer decision-making authority moves to the customer – i.e., to the one closest to the customer – the more effectively the employee's actions contribute to the big goal. Ultimately, it is the customer's satisfaction that determines whether a company achieves its goal. Even for an automotive or mobility company. And when I, as a customer (or supplier or partner), want something from the company, I expect all energies to be focused on me. No crash course in poor leadership – in the form of an employee who "unfortunately cannot help" me because they have to ask their superior, who then has to check their target first. Leadership is mainly responsible for ensuring the right attitude throughout the company. Setting a framework for excellence, thinking futuristically, and being an inspiration to employees – these are the central tasks of leadership. On the other hand, if a leader is always eyeing their personal target with one or both eyes, they will always be tempted to influence matters accordingly. In such a structure, the specialist is reduced to the role of a receiver of orders. What a waste! This leadership style deprives employees of the necessary freedoms they need to be effective. And the shifted perspective robs leaders of the freedom to be creative and innovative at a higher level. The most important incentive that leadership can provide is to give everyone the right freedoms: granting executives more freedom for creativity, innovation, and inspiration. And giving employees more decision-making and action freedoms in operational matters.  

For more information on the Corporate Monkeys and Carsten K. Rath, please visit: https://www.speakers-excellence.de/redner/carsten-k-rath-service-hotelbranche.html