Organized sports work best when the teams are competitive. Rules that ensure parity exist for nearly every successful league. This is because close competition is a big part of the product. Real fans are all about commitment and passion. This is reinforced by giving every team a “chance to win.” The sports that do this best makes the most money (another goal of any organized sport.) There are, of course, exceptions to this approach. Soccer/football and Formula 1 racing are examples of this. But NASCAR is one of the greatest examples of effective parity.
NASCAR makes about twice as much money as Formula 1, despite being a mainly US sport. NASCAR also produces more different winners each season. NASCAR requires all cars to be nearly identical. The requirements are incredibly precise. Just a half an inch of advantage can get you disqualified. All of this is done so fans can cheer on their driver or team and know that winning is a possibility.
In truth, the wealthiest teams have a huge advantage. They can hire the best drivers, build the best equipment, use the best testing processes, and have the most backup vehicles. If you aren’t one of them, you are just trying to get lucky and avoid a big crash.
BUSINESS AIN’T NASCAR!
If companies were told that their pay programs HAD to be just like their competitors, they would protest loudly. But, most companies treat pay like it has the rules of NASCAR. Most Compensation Philosophies could easily be converted to, “We pay almost identically to our peers, because the survey data is easiest to follow that way, and we are trying to get lucky enough to get a few great people who will either help us be slightly more competitive or avoid a big crash.”
LET’S TRY SOMETHING NEW!
I promise you if NASCAR tossed its rule book, teams would immediately build better, faster, and more incredible race cars. The best teams would become better. The most innovative teams would try new things, most of which could be proven to work elsewhere (Formula 1 aerodynamics, next generation tires, lightweight cars, etc.) Those who stick with their old cars would seldom compete at any race and would never compete for a season title.
I also guarantee that the best teams would not share their unique data. They would not explain how they won. They would not explain why they made the choices they made. They would protect their secrets as if they were the most coveted things in the world. They would only share data in surveys if they felt it would misdirect their competitors.
Instead of building cars, or pay programs, that are just like our competitors, let’s build vehicles designed to crush and out-perform our peers. We are not trying to “entertain” a crowd. We do not seek to “keep our fan base.” Each of us is trying to win everything, all the time. It would be so much easier if we realized that the only rule is: Do what works for you and to heck with everyone else. I look forward to seeing you at the race track!
Dan Walter, CECP, CEP is the President and CEO of Performensation. He is passionately committed to aligning pay with company strategy and culture and considered a leading expert on equity compensation issues. Dan has written several industry resources including a recent Performance-Based Equity Compensation issue brief. He has co-authored ”Everything You Do In Compensation is Communication”, “The Decision Makers Guide to Equity Compensation”, “Equity Alternatives” and other books. Connect with Dan on LinkedIn. Or, follow him on Twitter at @Performensation.
This post originally appeared on Compensation Cafe
Author: Dan Walter-Performensation