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Suzanne Nora Johnson
Financial Leader

Suzanne Nora Johnson

Former Vice Chairman of The Goldman Sachs Group, Inc., Suzanne Nora Johnson chairs the Global Agenda Council on Systemic Financial Risk at the World Economic Forum.

Take One For the Team

One of the most compelling attributes of leaders is their appreciation and understanding of the life and work experiences and circumstances of their teams. This means in a very practical way, sharing some of the burdens and hardships the team faces. This may include a broad range of practices, including, among others, compensation, severance policies, travel guidelines and family and medical leaves. At all times, but particularly in times of adversity, demonstrating the ability to "take one for the team" and "lead by example" is not only responsible, it is essential.

Further, it is in these challenging times that the most important values of an institution or organization are either reinforced or undermined. To the extent that the ideals of shared sacrifice or longer-term objectives are to be taken seriously, near-term pay cuts can be powerful evidence of the actual intentions and goals of the leadership and the importance to which a leader pursues such goals.

There is a fair amount of insightful academic work suggesting that even in the best of times, when an organization unduly stratifies its compensation structure, it has more inefficiency and less collegiality. The "internal equity" within an organization -- meaning the ratio of compensation of a leader to others in an organization -- is a very useful metric in evaluating whether a leader is appropriately compensated. It also provides insight into whether there is the potential to disenfranchise or motivate others in the organization based on the leader's compensation. Although not always a dispositive metric, internal equity can provide a useful reference point. In the recent past, too much of the focus, sometimes the exclusive focus, has been on external compensation benchmarks with little or no regard to internal equity.

Leaders must also be on guard from the advice of their direct reports who may be opposed to reduced compensation for the leader for fear that it may affect their own compensation as well. It is in just such situations that leaders will distinguish themselves most by recognizing that everyone on the senior leadership team must be one for all.

By Suzanne Nora Johnson

 |  March 19, 2009; 3:20 PM ET
Category:  Compensation Save & Share:  Send E-mail   Facebook   Twitter   Digg   Yahoo Buzz   Del.icio.us   StumbleUpon   Technorati  
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