At the Harvard Business Review, CEB’s CEO Tom Monahan argues that many boards of directors these days are too conservative in their approach to corporate governance, “far more focused on minimizing risk than on seizing opportunity.” Pursuing a long-term growth strategy, however, requires that boards not get too hung up on conforming to benchmarks in the short term:
The best companies do things differently by using data and benchmarks not to aspire to the median, but to ensure radical deviations that are consistent with core strategies.
Let’s take pay. While benchmarks are useful inputs for compensation decisions, they shouldn’t be a straitjacket. Applying them broadly without reference to your talent strategy could make it impossible to source or retain the people you need to achieve goals. If your strategy relies heavily on aggressive M&A, for example, do you really want a CFO who doesn’t command a salary higher than the norm? Or if your success relies heavily on IP protection or patents, it may make sense for your general counsel’s pay to be the highest in the C-suite.