Rewarding Success

The ST _A RS framework has implications for how you should evaluate and reward the people who work for you. When groups of new leaders are asked to predict which type of transition is rewarded best and which the least when performed successfully in their organizations, turnarounds typically emerge as the best rewarded and realignments the least.

This is not surprising. A successful turnaround is a visible and easily measurable individual accomplishment, as is a successful start-up. In a realignment, by contrast, success consists of avoiding disaster. It is hard to measure results in a realignment ”it is the dog that does not bite. Also, success requires painstakingly building awareness of the need for change ” which often means giving credit to the group rather than taking it yourself. As for rewarding sustaining success, people seldom call their local power company to say, Thanks for keeping the lights on today. But if the power goes off, the screaming is immediate and loud.

There is a paradox inherent in rewarding people most lavishly for successfully turning around failing businesses. Few high-potential leaders show much interest in realignments, preferring the action and recognition associated with turnarounds (and start-ups). So who exactly is responsible for preventing businesses from becoming turnarounds? And does the fact that companies reward turnarounds (and do not know how to reward realignments) make it more likely that businesses will end in crisis in the first place? Skilled managers can seemingly count on less-accomplished people to mess up businesses so they can come charging to the rescue. Claire Weeks s successor looked like a genius.

The more general point, of course, is that performance must be rewarded differently in the different ST _A RS situations. The performance of people put in charge of start-ups and turnarounds is easiest to evaluate, because you can focus on measurable outcomes relative to some clear prior baseline.

Evaluating success and failure in realignment and sustainingsuccess situations is much more problematic . Performance in a realignment may be better than expected, but still poor. Or it may be that nothing much seems to happen, because a crisis was avoided. Sustaining-success situations pose similar problems. Success may consist of a small loss of market share in the face of concerted attack by competitors or the eking out of a few percentage points of top-line growth in a mature business. The unknown in both realignments and sustaining-success situations is what would have happened if other actions had been taken or other people had been in charge ”the as compared to what problem. Measuring success in such situations is much more work, because you have to have a deep understanding of the challenges new leaders face and the actions they are taking in order to assess the adequacy of their responses.