Roberto Goizueta understood the power of compensating the behavior you want to reward. As we already discussed in the section dealing with return on capital, Goizueta measured management success as a specific return above a hurdle rate established by Coca-Cola headquarters for use of the money. The effect of this approach was immediate. Bottlers began switching from metal containers to plastic, saving untold millions of dollars in capital expenditures that instead flowed to Coke's bottom line.
One of the single most important decisions you will make in your own life, whether you're talking about raising your children or handling employees, is the compensation system you design. Charlie Munger points out that it was a single stroke of the pen that caused FedEx to solve its deliver problems by tweaking the way package handlers were paid - in short, once the goods were processed through a hub, the workers were allowed to go home and were still paid for a full night of work. Up until then, nothing had mattered: bigger bonuses, salaries, benefits - nothing got the employees to actually do the job on time until you told them they could go home yet get paid the same. The problem was instantly solved. Thus is the power of a good compensation system.
