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You're paying highly paid people to take problems off your plate. Instead they're handing you back monkeys, drama, and a deal you end up pricing yourself. Sales and Operations are at war over what got sold and what can actually be delivered. Finance is caught in the middle. You're the referee. You're not bad at this. The comp plan is. Each leader gets paid on their own win, so winning at a peer's expense pays, and the monkeys land back on your desk by the end of the day.

In this episode I walk you through the annual executive comp plan I installed at my family's business and have put in with clients since. The move is to tie your top leaders to each other through the income statement and to your ownership goals at the same time. Half of their variable rides on their own seat. A quarter rides on each peer. Now winning at a peer's expense stops paying. Now the monkeys stay where they belong. Now you get to do the work only you can do, the strategic, the big, the broken things that are actually interesting to you. Kim and I get into the bonus pool sized top-down off normalized net operating income so it's always affordable, the multipliers that run both directions, and why one of our clients ran the math and decided not to hire the $500,000 CEO he was about to go find. He wanted the seat back. The seat got worth wanting again.

Top 10 Takeaways

You're paying highly paid people to take problems off your plate. They're handing you back monkeys.

The drama isn't your team. It's the comp plan paying each of them only on their own win.

Tie your top leaders to each other through the income statement. Three buckets, three seats: revenue, margins, SG&A and cash.

The 50/25/25 model ropes them together. Half their variable on their own seat, a quarter on each peer's.

Now winning at a peer's expense stops paying. The monkeys stay where they belong.

Comp each executive on numbers they actually control. Not on a peer's leadership growth.

Size the bonus pool top-down. A fixed slice of normalized net operating income. Bottom-up reconciles to it.

Run multipliers on every seat. 1.1x to 1.2x up, 0.8x to 0.7x down, with a floor where the piece stops paying.

The company's cash flow and your ownership goals set what comp is affordable. Title doesn't. Wish doesn't.

Get the comp right and you get the work back: the strategic, the big, the broken things only you can do.

Chapters:

(00:00) Ryan and Kim on designing the annual executive comp plan

(02:33) The drama isn't your team — it's the comp plan paying on their own win

(03:21) The 50/25/25 model: tying top leaders to each other through the income statement

(10:30) Size the bonus pool top-down off normalized net operating income

(12:20) Cash flow and ownership goals set what comp is affordable — title doesn't

(18:00) Comp each executive on numbers they actually control, not a peer's growth

(20:43) Total inversion: monkeys stay where they belong, you get the work back

(21:06) Run multipliers on every seat: 1.1x up, 0.8x down, with a floor

(53:46) Fractional leaders: can they actually own the outcome of the seat

(1:05:20) You've got to do the work — comp grounded in data, goals, and financials

This episode was produced by Castos Productions.

Resources:

Executive Comp Workshop June 25 – 9 AM - 11am CST – Virtual, Live, Interactive: https://ryantansom.com/the-compensation-blueprint-workshop

90-Day Boardroom Blueprint Ryan's onboarding program that walks owners through the IBD Ownership OS, three-statement financial model, budget, and forecast — the foundation required before designing any executive comp plan. https://ibd-ownership-os.mn.co/plans/1974651?bundle_token=e7ab472deac3881f18ad4399f1fe79d9

Strategic Talent Partners — Mike Frommelt, a Minnesota-based executive search and leadership assessment firm. Ryan's recommended resource for C-suite recruiting, leadership team roadmap assessments, and real market compensation data. https://strategictalentpartners.com

Strata Cloud Accountants Ryan's named preferred IBD partner for fractional CFO services — specifically called out as one of the only firms that actually delivers the three-statement financial model. https://stratacloudaccountants.com

Robert Half Salary Guide Published compensation benchmark data Ryan referenced as one starting data point for executive base pay research. https://www.roberthalf.com/us/en/insights/salary-guide

Ep. 493 — Ryan & Kim: How to Tie Everyone's Compensation to Your Ownership Goals Last week's episode. The Module 8 foundation this episode builds directly on. https://independence-by-design.castos.com/episodes/493-ryan-kim-how-to-tie-everyones-compensation-to-your-ownership-goals

Ep. 492 — Ryan Tansom: How to Analyze Your Margins and Gross Profit The margins and gross profit groundwork behind the COO's bucket in the income statement. https://independence-by-design.castos.com/episodes/492-ryan-how-to-analyze-your-margins-and-gross-profit

Ep. 481 — Nick Bradley: The Private Equity Operating System The private equity conversation Ryan referenced when walking through the three-buckets framing of the income statement. https://independence-by-design.castos.com/episodes/481-nick-bradley-the-private-equity-operating-system

Ep. 480 — Kim Clark: What a CRO Does to Create Predictable Revenue Background on the CRO's KPIs, predictable revenue scoring, and the functional assessment referenced in this episode. https://independence-by-design.castos.com/episodes/480-kim-clark-what-a-cro-does-to-create-predictable-revenue

Ryan Tansom Website: https://ryantansom.com/