Ep. 493 — Ryan & Kim | How to Tie Everyone's Compensation to Your Ownership Goals

4 min read

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Episode Summary

You have a $40,000 executive comp plan sitting on your desk and you don’t know if it’s the right one. Your insurance broker pitched it. Your attorney drafted it. Your HR person was distracted. And it’s tied to absolutely nothing that matters. The first call I had with that client, he asked me, “should I sign this?” I asked back: what’s your five-year valuation target? Cash flow goals? Do you have a financial model? Three nos in a row. That’s where most owners are. Comp gets treated as an HR motivation problem when it’s actually a capital allocation decision that has to trickle down from the owner’s goals. Kim and I open Module 8 with the reframe and the cascade: why this module only works after Modules 1 through 7 are installed, why normalized net operating income beats gross profit and net income for the bonus pool, what 10% of NNOI looks like split across the executive team and the company, and why phantom stock does most of what real equity does without putting anyone on your cap table. When the goals are clear and the rules are clear, the executive team runs the field. When subjectivity rules, everyone is just guessing.

Top 10 Takeaways

  1. Your comp plan keeps failing because you’re paying people on outcomes they can’t control.
  2. Comp tied to gut feel breeds resentment, not productivity. The exact opposite of what you wanted.
  3. Comp design starts with the owner. Not HR. Not your attorney. Not the insurance broker pitching annuities.
  4. You can’t build a comp plan without a five-year valuation target and a financial model in front of you.
  5. Hiring a CFO before your model exists? Tie their first bonus to building the model.
  6. Comp is a capital allocation decision, not a motivation problem. You’re sharing future cash flow.
  7. Normalized net operating income beats gross profit because a CRO can crush GP and crater operations by overhiring.
  8. Your bonus pool is 10% of normalized NOI. Everything else is just how you split it.
  9. Phantom stock is a legal contract and a real liability on the balance sheet. No cap table, no K-1.
  10. When the goals are clear and the rules are clear, the executive team runs the field. Subjectivity is exhausting.

Sound Bites

“It does boil into that resentment and lack of productivity, and it actually has the inverse effect of the intention of the comp plan itself.” (@00:04:10) — Kim Clark

“How many people go to their attorney like, we need an executive comp plan, insurance person comes in, like, I can sell you a bunch of annuities. The HR person’s distracted. And it’s tied to absolutely nothing that matters.” (@00:09:45) — Ryan Tansom

“The staff can’t have any impact on your debt, all the different CapEx decisions, all of the stuff that are ownership capital allocation decisions. We want to isolate just the normal level of operating for the rest of the company.” (@00:20:59) — Ryan Tansom

“Megan’s like, I got a $4,500 bonus today. I was like, why? She’s like, no idea. Such a waste of money.” (@00:29:46) — Ryan Tansom

“It’s only when we understand how the system works can we develop a strategy to win.” (@00:45:20) — Ryan Tansom

Resources Mentioned

  • 90-Day Boardroom Blueprint — The onboarding program where Ryan walks owners through the iBD Ownership OS, the financial model, and the five-year valuation target. — ryantansom.com/coaching
  • Executive Compensation Workshop (June 25, 2026) — $100 paid workshop where you actually build your own executive comp plan tied to your ownership goals. — ryantansom.com
  • The Great Game of Business — Jack Stack and Steve Baker’s open-book management framework. — greatgame.com

Connections

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