Talent, Hiring, Disproportionate Rewards and Guidance from the World of sports

Exceptional people deserve exceptional pay. We can look to the sports world for guidance: Outstanding athletes get paid outstanding amounts. It’s not uncommon for the best players on a professional team to be compensated with deals worth hundreds of millions, while the deal the guy at the end of the bench gets is only in the hundreds of thousands. Are those stars worth it? Yes, when they perform up to expectations, because successful athletes possess rare skills that are tremendously leverageable. When they do well, they have disproportionate impact. They help teams win, and winning drives huge business benefits: more fans, more viewers, more jerseys and hats sold. Hence, the big money.

Top performers get paid well in athletics, and they should in business too. The bigger the impact, the bigger the compensation.

At the opposite end of the scale, managers should reward people greatly only when they do a great job. They are managing professionals, not coaching little league, where everyone gets a standing ovation and a trophy. All men and women are created equal, but that decidedly does not mean they are all equally good at what they do. So don’t pay or promote them as if they are. Big rewards should be given to the people who are closest to great products and innovations. Pay outrageously good people outrageously well, regardless of their title or tenure. What counts is impact.

— Eric Schmidt, “How Google Works”