Skin in the Game

In a previous job, I had around 100 salespeople who reported either directly or indirectly to me.  As a group, they were strong in sales.  But they lagged in paperwork, especially sales reporting and expense reports, and in doing any kind of mathematical cost-benefit analysis for their customers. However, when it came to their commissions (we had a complex commission program), they were mathematical geniuses knowing the effect of what each sale would mean for their commissions.

This anecdote illustrates well the importance of having “skin in the game.”  When these salespeople had skin in the game – their commissions – they understood everything.  Having skin in the game focuses our mind and attention to the matter and significantly improves understanding, accountability, and performance.

As leaders, we need to ensure that we have ‘skin in the game’ especially regarding any rules, policies and procedures that we may introduce in our company.  We need to be equally accountable and responsible for following our own policies and procedures.  What is good for our team needs to be equally good for us.  Similarly, if we ask someone in our company to take a risk, we need to take a risk right along with him or her.

Nassim Taleb is the author of the book, Skin in the Game.  The main idea of the book is that too many business and political leaders make laws and procedures where they do not have skin in the game.  There is no accountability and the leaders do not need to follow their own rules.  This leads to unfair and overly complex laws and procedures.  A few examples in business that I have seen:

  • Complex expense tracking and reporting systems that the top executives don’t need to follow because their administrative assistants do it for them.
  • Overly complex policies that people in the organization are required to follow, but not the leaders.

“Things designed by people without skin in the game tend to grow in complication (before their final collapse).”  Nassim Taleb

  • Risky initiatives assigned to a young leader that can make or break his or her career where the boss has no risk and will suffer no ill effects if the initiative fails.
  • Advice from a financial advisor to invest in something her or she is not invested in him or herself.
  • Reports from consultants who are paid for the reports not for the success or failure of their recommendations.
  • Unequal pay structures where top management are insulated from performance risk due to the size of their base salaries.

When leaders do not have skin in the game, they do not understand the challenges and struggles of their team, they make things more difficult for their team, they are respected less, and their companies underperform.

The final thought goes to Nassim Taleb.

“Never trust anyone who doesn’t have skin in the game.”

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About David Shedd

David has been a President - CEO - COO of an up to $350M group of manufacturing, distribution, specialty retail and services companies, having led 22 different businesses from turnarounds to start-ups to fast growth companies.
This entry was posted in Business Acumen, Leadership, Personal Success and tagged , , , . Bookmark the permalink.

1 Response to Skin in the Game

  1. pmripley says:

    Hi David,

    I enjoy reading your posts especially this one.

    I found your quotes lists today on your website.

    Pretty extensive. Attached is my comprehensive quote list that I’ve been collecting for decades.

    I love quotes (like Bible verses) they keep me focused and going in the right direction with enthusiasm.

    One quote I’ve often use even today is from Aesop. “After all is said and done, more is said than done.” Way too much talking and not enough doing.

    Paul

    Paul

    215-266-8710 Cell

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