Thoughts From The Cake Scraps

Hope.  Of all the things that motivate an individual to act, an action creating hope is one of the most powerful.  Doing something that creates the possibility of a better and brighter future is an amazing draw.  Better yet is when we’re able to partake in an act that has no immediate expense to ourselves and still creates the chance for a more fulfilling future.  When a company is going through the process of finding a new CEO it is hope that prompts them to make offers considered excessive by the general population.  Let’s explore that idea.

While this post comes fresh off my attendance of eMetrics, it has been on my mind for a while and the conference just reinforced the view I had.  CEOs matter. Leadership matters.  A company lacking leadership will not only flounder with the problems of today but will also be unequipped to deal with the issues of the future.

For this reason, when deciding on a new leader a company desperately wants to find the right person.  If they believe they have found that person they become willing to do whatever it takes to get them.  They promise “golden parachutes” of benefits to draw these leaders away from their current positions and provide a compensation package even more compelling.

Hopefully they never have to pay out the parachute.  Hopefully the compensation is small compared to the value created.   Hope. Hope. Hope.  That is all the company has when making that hiring decision.

Not convinced?  Two words provide the study that makes the point: Steve Jobs.

The impact of his second stay with Apple cannot be overstated. He took the company where he wanted it to go and made it the company it is today. Could anybody else have done that? Did anybody else have the connections he had? Would they be the same expert salesman?  Did they have the ability to say no to almost everything such that the company could focus on a few things that will change the world?  Many would argue the answer is a clear no.  Steve had the whole package.

You probably own an Apple product.  Having your life so impacted by an individual, consider, if he were alive today and in “free agency” what would you say is fair pay for him?  I’m sure he had all sorts of golden parachute options baked into his contract.  Stock options, salary, etc.  All of the things typical of the “fat-cats”.  And yet, his leadership changed lives of consumers everywhere and grew Apple to one of the largest companies (by market cap) in the world.  Apple didn’t know that when they signed him on. It was a hope.

There may have been no better fit for Apple, but I’m certain there are other similar situations every day – companies believing they have found the right leader for their market, for their size, with their location, with their brand, etc.  The company hopes it has hired their own version of Steve Jobs.

But sometimes they fail.  In fact, in a recent article in Forbes, while the readership overwhelmingly voted Steve Jobs the best CEO, the editors disagreed saying he couldn’t do what he did at Apple in other verticals.  If Steve had decided to move on (unlikely) the price another company would have offered could have been astronomical.  Still, there is no guarantee it would have turned out.  He could have failed.  How ridiculous would that pay package look?

Case study after case study shows that the leader matters.  Picking the wrong one can destroy a company and, with it, the jobs of all those underneath.  When thinking of it in these terms – the fate of shareholders, employees, and customers – through the lens of hope, it is not so difficult to understand why pay has gone so high.  Global competition has increased while the internet has made the cost of making a mistake soar.

So remember, the next time you hear about how much your company pays your CEO realize they’re looking for their own Steve Jobs.  You probably don’t have all of the details and it could be that CEO’s performance that is keeping you employed at all.

Then again, they could just be overpaid.  This is simply one take on an alternative point of view.

So, given his impact and the enormous value he created, could you overpay Steve Jobs if you knew losing him meant throwing away all Apple products (and the $75 Billion in cash Apple has)?

This has been a Thought From The Cake Scraps.