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Image Credit: <www.viewfromascope.com

Image Credit: <www.viewfromascope.com>

…So Yahoo COO Henrique de Castro was recently fired after spending less than a year and a half on the job. It was an expensive severance even at a level where such things almost always are, and the fallout has spurred much discussion

I don’t really have much to say about the hiring (or firing) itself. I’m not familiar with the data Yahoo had when it made the decision to hire de Castro, and I’m not going to armchair Quarterback. With that said, I bring the story up because executive comp expert Dan Walter has a great piece up on Performensation citing the firing as evidence that we should perhaps be rethinking how we compensate superstar talent. Would Yahoo have been better served hiring several talented people to do the work for which it hired one?

I’m not so sure. I fundamentally believe in the idea of leaders – among other reasons, holacracy usually doesn’t work because some of the toughest (and most important) business decisions can’t be handled by committee. Discussion within teams is critical, but if an organization waits to generate consensus on everything then it will sometimes be too slow to innovate: There are occasions where we all just need direction.

…But this is fundamentally a separate question from that of compensation. For while I would submit that in most cases leaders should certainly be paid a premium for their work, I think Walter was focusing not so much on the utility of leaders and managers (I shudder to think about a company with 100 COOs), but rather something more simple: Setting aside questions of organizational structure, how much more valuable is the most talented person in an organization than the median performer? And assuming the answer is “a great deal” (and the evidence we have supports this), how many median performers would it take to replace that person’s work? As we discussed the other day, most organizations don’t really know.

…This really goes to a question of job valuation. There are programmers and software developers that make millions of dollars a year and are worth every penny: They think of things no one else does, and going out into the market and hiring 10 other talented people willing to work at 10% of the salary would be unlikely to yield the same results of the singular “superstar”.

So this isn’t a bodies question… but I don’t think this is strictly a matter of paying at market either. I’ve written at length about executive compensation packages before, and have said that they’re fundamentally fair because they pay what the market dictates.

…But what if we’re using the wrong data in those cases (and others)?

As always, please share your thoughts in the comments section below.

Best,

Rory

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