The Biggest Risk I Ever Took as a Leader
The #1 reason companies don't seek to BREAK THE MOLD™ and transform?
Fear of risk.
So leaders default to embracing the status quo or "the way we've always done things".
I can tell you from experience—that's not going to get you to the transformation, growth, and success your organization is striving for.
Look, I get it... I mean, by definition:
risk (n): a situation involving exposure to danger, harm, or loss.
When it comes to business, harm and loss are especially pertinent.
"What do we stand to lose?" "How will the company, my team, or my reputation be harmed if the risk doesn't pay off?"
These are fair questions!
AND they ignore the other possibility... upside.
What if you take a risk and things turn out extraordinarily well?
The biggest risk I ever took as a leader involved altering our approach to partner compensation while I was CEO at Baker Tilly.
I took a huge gamble that involved the possibility that everything blew up in my face... and that's a terrifying reality.
What resulted was a brilliant example of the value of risk AND an important lesson for any leader seeking to BREAK THE MOLD™.
Here's the story...
Setting the Stage
At the time, like many firms, we provided Managing Partners with compensation pools to allocate amongst their Partners.
It was a formulaic approach based purely on math—we called it Algebra 8. Plug-in data and the formula spits back a compensation pool. Never mind the 800-line Excel spreadsheet.
Each year the response was that the pool wasn’t large enough to “take care of the Partners”.
So we’d haggle over moving money from this pool to that pool until we found the least bad result.
At the end of the day, no one was really happy…
Partners felt their compensation was dictated by the firm rather than their individual performance.
Managing Partners felt they really had no say—they were just operating within the confines of the system.
It was leading to a culture of mistrust and people felt like they didn't have the authority to make decisions they felt were right.
For me, as CEO, those are two major red flags.
So I made a risky and incredibly nerve-racking decision…
Inside the Risk
Without providing a compensation pool, we asked the business leaders to tell us what each Partner should make based on their performance.
They knew their business performance relative to the firm’s and they knew the relative performance of their Partners. So, they had what they needed to propose compensation for each Partner.
You could imagine what might have happened…
What if they come back with awards that totaled more than the profits we had to allocate?
Where would we get the money?
What if we had to tell the business leaders to go back and reduce their recommendations?
It would be a disaster because as we all know, once a number is written down, it’s almost impossible to move off that number.
I knew I wanted to be a leader who operated from a place of abundance, not scarcity.
I wanted to lean into decisions that enabled strategy and enabled strong culture.
So we tried the new approach…
We ditched the formula and empowered Managing Partners to advocate for their Partner's compensation based on their evaluation of a Partner's performance.
The Managing Partners got to decide.
What happened next was brilliant.
The Surprising Result
After the Managing Partners did their reviews and calculations, they submitted requests for compensation for their Partners.
The total of all the requested compensation awards?
It came in below the total profit we had allocated for compensation and left us with some more profit to spread around.
In case you’re questioning this, nobody knew any numbers; the total to be allocated, what others proposed, nothing.
Everyone was in the dark or actually in an organic state of Partner performance and compensation awards.
We did it. We took a risk and it paid off—big time.
Two important things came as a result of the change:
The business leaders felt empowered to lead and award their Partners properly.
The Partners learned of the new process and felt heard and acknowledged now knowing their boss determined their comp without the guardrails of a compensation pool.
💡 Notice how this highlights the difference between transparency vs inclusion.
Initially, we were transparent about compensation because everyone knew the formula. But it still left people feeling they weren't part of the decision making process.
Involving Managing Partners in the decision-making is an example of inclusion. People had a say and influence in the outcome.
See the difference? You can be transparent without being inclusive.
Everyone wins. A true BOTH/AND.
Leadership is about being willing to take a risk because it’s the right thing to do—even when you don’t know how it will turn out.
When I'm advising firms, these are the types of conversations I'm facilitating with their leadership team. I'm helping them think about situations differently and implement new solutions to enable transformation and growth.
If you'd like to see your team come up with and implement innovative ideas to drive transformation and growth in your firm, let's chat. Send me a reply or book a call below.
With intention,
Alan D Whitman
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