For decades Hawaii has hoped to emulate Silicon Valley’s wealth-producing engine. There have been a few successes over the years with successful startups, but they have had little impact on the Aloha State. For better or worse, we seem to be eternally wedded to tourism, real estate development and the military.
How do we change the landscape to create more and better high-paying jobs and keep kamaaina from moving to the mainland?
Ray Tsuchiyama of Honolulu-based consulting firm GUILD said it would be impossible to duplicate the complete Silicon Valley model but that there are lessons we can learn.
The main takeaway, says Tsuchiyama, is to transform the existing productivity of our workforce rather than trying to duplicate Silicon Valley’s innovative technology juggernaut. He points to a study by Collaborative Economics to illustrate his point. Innovation workers in Silicon Valley produced $225,000 in added value per employee annually. He estimates that Hawaii workers, by comparison, add approximately $60,000 per employee, or a quarter of added value vis-a-vis Silicon Valley workers.
Although Hawaii CEOs seek higher value per employee, too, they can’t compare to the way Google or Facebook tap into their employees’ creativity and resourcefulness. One big reason is that those companies deploy stock option plans. Silicon Valley firms’ employees work as if they are co-owners, and for that they are compensated highly when young startups strike it big. The easiest way to get employees to act like owners is to make them owners.
How can Hawaii employers foster an ownership mind-set in employees without offering stock options?
He suggests that Hawaii companies — from restaurants to software products — can coax productivity out of employees by creating good incentive plans. These programs should be specifically designed to motivate employees to drive business growth, and if they do, they should earn higher than their base pay.
Incentive programs, he said, can help companies in several ways. They promote exceptional performance, and they attract higher-caliber employees to an organization and encourage greater company loyalty. He cites several local companies that have successfully implemented incentive programs in different industry “verticals” such as Gourmet Events (event production), Hawaii Cool Water (water filtration systems) and ZR Systems (IT services).
How can local companies deploy incentive programs? He has five rules:
1. Start small and begin with key managers only: Due to their visibility and influence, managers will have a disproportionate impact on the company’s success (or failure). Get key managers “on board, improve the plan over the next several quarters and, only then, expand to other employees.”
2. An incentive plan is not a bonus plan: Unlike the year-end bonus, there is nothing “automatic” about a performance incentive plan. It is designed for one purpose: to align employee behavior to drive the business’ success. Further, annual payouts are too infrequent to drive meaningful change in employee behavior.
3. Sharing financials: Some firms expend much energy in communicating the firm’s financials and then give employees a piece of net income as the incentive, based on annual goals. All the number-crunching can be overwhelming for an employee who only seeks to know what he or she can do to help.
4. Identify the “critical few”: Educate employees on key “operational” levels that most influence the firm’s bottom-line growth. These must be easily understood by employees. An example would be “product installations” for a software company or “rooms occupied” for a hotel — easy to relate to.
5. Forecasts: The CEO should forecast key metric(s) and the resultant earnings accrued to the employee incentive pool. This practice will reinforce that performance is not an accident, but rather the result of deliberate actions taken by the entire team.
The bottom line is that performance incentives, just like the stock options used in Silicon Valley, can massively increase the productivity of Hawaii workers. “Carefully designed incentives,” says Tsuchiyama, “will build stronger, more resilient companies, increase revenues and produce more jobs.”
We can’t hope to replicate all of Silicon Valley here, but we can cherry-pick the best practices for us.
Mike Meyer is chief information officer for Honolulu Community College. Reach him at mmeyer@hawaii.edu.
