Accounting and Consulting
Money maverick
How Don Murray built a better compensation system at Resources Connection by ignoring the industry norm
By Ray Marano
Smart Business Orange County | June 2007
If you listen to Don Murray talk for a while, you might get the
impression that “a team of accountants” is an oxymoron.
The chairman and CEO of Resources Connection Inc. — the firm
operates under the name Resources Global Professionals — saw
a fundamental problem with the way professional services firms
structured their compensation and evaluation systems, particularly in his profession of accounting. The traditional models emphasized superstars and internal competition instead of teamwork
that should, as he saw it, turn one plus one into three.
The conventional model, as he sees it, creates an incongruity
between an organization’s stated beliefs and its everyday practices.
“Most companies go to the same core beliefs machine, and they
all sound alike,” says Murray. “Where the failure comes is there’s
no connection between the evaluation system and the compensation system and the core beliefs, because the core beliefs don’t
necessarily connect to what they think their results are. We’ve
gone the opposite way.”
Murray junked the star system and a dysfunctional evaluation
model and came up with one that truly emphasized and rewarded
teamwork instead of fostering an internal tug of war. His formula:
Hire top-flight employees, create a compensation system that
offers incentives based on company goals and implement a performance evaluation applied only to poor performers.
“Most companies’ view is that they have to pit their employees
against each other,” says Murray. “What I saw in public accounting
firms was people were more concerned about their partners down
the hall from them than they were about partners in other firms.
And they all viewed that there was a finite number of dollars and
therefore they had to compete internally for those dollars.”
Murray’s view was that the results and rewards that a different
model could produce would eclipse what the traditional model
could, and the company’s revenue growth demonstrates it. The
firm’s revenue in fiscal 1997, when it was spun out of Deloitte &
Touche, was $9 million, while it posted $634 million in revenue in
fiscal 2006. It’s been profitable every year and between fiscal 2001
and fiscal 2006, it posted compound annual growth of 27 percent.
Through all the rapid growth of the firm, Murray’s vision of how
to make all of his employees work as a team hasn’t wavered. That’s
because he sees the traditional way of evaluating and compensating people in place at Big Four and other firms as counterproductive.
“Because of the performance evaluation systems and how people got promoted, you could never get people together as team-mates, even though you’d say our goal is to get people to work
together as a team,” says Murray. “So what I did was eliminated
what I thought were the negative internal factors, like the performance evaluation systems that a lot of companies have, grading
people on a bell-shaped curve and so forth. I tied everybody to the
performance of the company and made them all shareholders and
instilled this, ‘We’re all a team and we’re all better off if all of your
teammates are as good as you are.’”
Hiring the best
Murray began with the premise that he wanted to hire only the
top performers who would fit into a culture that would reward performance in a more egalitarian way than he had experienced
under traditional systems.
“Hiring great people and getting them to work together as team-mates, a lot of the results take care of themselves,” says Murray.
“People who are talented and working together will accomplish
more than the individuals out there working by themselves. A lot
of companies promote the prima donnas and they’re the people
who are held out as examples and a lot of times they have bad negative behaviors internally. Employers can say, ‘We believe in our
people,’ but when they promote people who are really great at
developing business — they’re rainmakers but they have poor people skills — it sends a message to the company.”
To ensure that he could find those top performers, Murray formulated the four qualities he valued the most in the employees he
hired.
“I came up with an acronym for our human resources policy
back in 1995 called TIEL, and it stands for hiring people with talent, integrity, enthusiasm and loyalty,” says Murray.
To get the right people, candidates go through an extensive
series of interviews with a succession of managers and team leaders in the organization, including a visit with Murray for some of
the top posts. The object of the process is twofold: To get
the prospective employee familiar with Resources Connections as
well as to gather the opinions of the interviewers, who are all looking at the candidate through the lens of TIEL.
“People will say, ‘I’ve never been through so many interviews,’”
says Murray. “We tell them that gives you more of a chance to see
what the fabric of our company’s like. If you’re coming to work
here, you ought to be happy that you get to meet so many people.”
Pay for team performance
Murray instituted a three-pronged compensation system that
rewards employees on the basis of individual, team and company
performance. He says that, traditionally, there were multiple
reward levels for the partners, with those at the top of the ladder
getting as much as 20 times more compensation as those on the
bottom rung. To even out the compensation and encourage team-work, Murray smoothed out the peaks and valleys in the compensation scheme by rewarding on multiple performance metrics that
made employees interdependent for their income rather than in
competition with each other for it.
“So you’d get paid more when your team did well, you’d get
paid more when your company did well and you created wealth
as your company grew,” says Murray. “So, aligning the compensation with what our core beliefs were and aligning the evaluation system with our core beliefs was very important. So lining
those three things up so that they basically all supported each
other was really necessary to create a different culture.”
To further bolster the incentives for teamwork, he added a
stock compensation plan that links everyone as a shareholder.
Murray boosted base salary rates so that compensation was
based less on individual bonuses and prevented the infighting
that prevails in a system that is highly dependent on commissions and incentive bonuses.
“Some firms pay less of a base salary and more commission so
people have to fight every month to make their quota,” says
Murray. “We don’t have that kind of system. Then we have a
bonus system at the end of the year. It’s very simple and it’s basically tied to the growth of the company by revenue. Two-thirds of
it is based on how the office itself does and how that particular
team does, and one-third is tied to the whole company’s performance.”
Murray extends the notion of paying for performance to administrative personnel as well.
“For the first several years, I said to our people, ‘Every job at
Resources is important, every job is helping our business, so we
need to hire the best people,’” says Murray. “For years, I would
see that they would underhire for certain positions, like a receptionist, for example. So it came to me that I needed to raise the
minimum wage that I pay. So I came up with a concept that I talk
about that I call the living wage. In a big city, if we hire a receptionist, she’ll probably be paid twice as much as she would have
been paid before. That was one way we reinforced our core
belief that every job’s important and every employee’s important,
by a compensation system that doesn’t underpay anybody.”
Focused evaluations
With the presumption that a team of top performers didn’t need
policing, Murray replaced the traditional performance evaluation
with a demand for performance from employees.
“The only people who get evaluated are the people who aren’t
operating on the right side of the curve,” says Murray. “They’re
given a performance plan to get to the right side of the curve or
else they have to leave. With this type of a process, people are
interdependent on each other for part of their compensation and
part of their wealth creation. They’re a lot more intolerant of non-performers.”
Murray says the result is a work force that is the cream of the
crop.
“We don’t have the expectations that we’re going to have a company where 70 percent of our people are rated average,” says
Murray. “We want to have a company where with all of our people,
the expectation is, ‘We are going to be operating on the right side
of the bell curve.’”
Murray also rejected the traditional performance evaluations
because instead of serving to enhance performance, they tended
to obscure the true nature of individual contributions to the company or a lack of performance.
“What I experienced before was the performance evaluations all
sounded exactly the same,” Murray says. “You find out that they don’t
want to promote someone but you couldn’t figure out why they didn’t
want to promote them in the evaluation, because people don’t want to
confront issues in the process. So this is just a lot more honest. People
get immediate feedback here.”
Murray says the system in place at the company is self-regulating
because team members rely on each other for their own success. As
a result, it’s usually other team members who will bring a nonper-former to the surface.
“It’s amazing, but the teams do not tolerate underperformers,
because if you know part of your wealth is being created by the
person next to you, and you’re working hard to create wealth for
everybody, you don’t tolerate people who don’t pull their weight,”
he says.
Murray advises that his model isn’t an easy one to implement,
particularly if an organization has an ingrained culture of rewards
in tune with a more traditional model. In his estimation, it takes
leadership that trusts its people to perform in the best interests of
the group and a work force where everyone trusts each other to
hold up their end of the bargain.
Says Murray: “Most people would want to be in a situation where
they could trust the people next to them. If you’re climbing, the last
person you want holding the rope is somebody you don’t trust. The
whole purpose of having someone holding the rope is if you slip,
they’re going to hold onto the rope and save your life.”
HOW TO REACH: Resources Connection Inc.,www.resourcesglobal.com
