We have arrived at Reason 8 of 10 for leveraging the complementary competencies of Organization Development (OD) and Compensation.  These ten reasons for why OD and Compensation practitioners should not only be aware of each other but concerned and connected with one another come from Dr. Ed Lawler's seminal work on the subject, Pay and Organization Development (Addison-Wesley, 1981).  Reason 8: Pay is Visible and Tangible.

Dr. Lawler's argument for this particular reason is rooted in pay being quantifiable, having "a certain reality" to it.  While many of the variables OD works with are considered behavioral or "soft," compensation can be seen, touched, and felt by every single employee of an organization.  He goes on to say many cynics of OD complain that nothing real has been tackled; that nothing has really changed nor is a real difference being made.  Conversely, when pay or compensation initiatives change in association with an organizational change - regardless of how big or small - the tangibility of the direct impact on rewards received by employees deflates any argument that things have stayed the same.  Whether pay goes up or down, people know something has changed which can then help signal the broader organizational change.

Case in Point: I return to the large computer entertainment organization who had successfully institutionalized behaviors through the malleability of its rewards programs, targeting each years' primary goals as part of its management incentive plan.  Until we incorporated inventories into the rewards program, leadership gave it little thought.  "It will have to wait; I have bigger [and sexier] fish to fry."  However, when the company was willing to pay out significant sums of money for the return of  strengthened key financials that otherwise got overlooked, suddenly we had their attention.

Cut to the Chase: I can say from experience with this organization that other endeavors at organization-wide or even division-wide change were never so successful as when we associated them with compensation.  I do raise the issue of culture: this particular organization - industry - had a higher focus on rewards than some, and so I do encourage an assessment of cultural appropriateness.  Yet when the company needed to make a large-scale change in behaviors and focus, they were able to make sweeping changes more effectively and be taken more seriously when dollars were attached.

Including compensation in organizational change efforts can be akin to an organization "putting its money where its mouth is."  There is a level of gravity and significance that can trigger greater confidence in the organization and what it is attempting to change when rewards are combined appropriately with organization change.

Where has your organization successfully utilized the visibilty and tangibility of money to increase the success of a large-scale change?

We’re rounding the bend on the last of the top ten reasons to leverage the complementary competencies of Compensation and Organization Development (OD) for greater organizational effectiveness. These ten reasons, extracted from Dr. Ed Lawler’s Pay & Organization Development (Addison-Wesley, 1981), are hopefully a jumping off point for some rich dialog, both internal to organizations and external, around how these very distinct disciplines can partner to help drive the business forward.  We come to Reason #7: Pay and System-Wide Change.

That compensation initiatives are probably an organization’s strongest lever of enterprise-wide change will not come as a surprise if you’ve read my previous Musings.  I have mentioned this numerous times, in numerous ways.  Yet what may surprise you is my twist on this particular post.  OD has large-group methods that also have the ability to reach a broad audience. I agree with Dr. Lawler that, “many of the traditional interventions that organization development specialists use impact on only small groups of employees.”  Yet there are also many methods and forums used by OD practitioners to bring about successful large-scale change.

Case in Point: On one of my less-than-shining moments some moons ago, I reluctantly agreed to revamp the domestic U.S. salary structure with the request to “keep it off the managers’ desks.”  Everyone was inordinately busy and the directive from the CEO was to keep everything ‘administrative’ away from management; the project to upgrade the salary infrastructure was deemed 'administrative'.   Whether they realized it or not, I had the attention of 70% of the population: decisions we made could result in a red circle, an increase in pay, a change in exemption status, or greater or lesser opportunity to financially progress just to name a few.

Cut to the Chase: Had I known about one of these large-group methods of change at the time, I could have partnered with OD to build a rich, 'non-administrative' dialog with a large group of leaders around the U.S. about what the organization needed relative to the pay structure ("what did we hire it to do?"), what the obstacles were to being able to attract and retain talent with regard to salary, and other strategic and philosophical topics.  It might have taken two days of managers’ time on the front end (this obviously excludes what can be months of set-up behind the scenes), yet I am convinced collectively and methodically gaining their insights – and they from each other - would have saved weeks' if not months' worth of questions, confusion, and disruption on the back end. 
 
While compensation is undoubtedly one of the largest levers of organization-wide change, it is important to not lose sight of the great tools OD has to help implement these large-scale changes.  There are times when I’m guessing Compensation professionals have lost sight of the power at their fingertips.  I know on occasion I did, and I only wish I had then known about methods like Open Space and Future Search to gain the important broad-reach collective buy-in for greater success.

I wonder how familiar most Compensation professionals are with this type of 'large-group intervention'.  (I know I wasn't until I entered the Pepperdine MSOD program.)  I'm also curious as to the possibilities people can see in using some of these methods to more successfully implement broadbased compensation changes.  Thoughts?

Today we start the second half of the top ten reasons to leverage the complementary competencies of Compensation and Organization Development (OD) for greater organization effectiveness and employee empowerment.  The top ten reasons come from Dr. Ed Lawler's book, Pay & Organization Development (Addison-Wesley, 1981) - the only book I know of that speaks to the natural synergy between the two disciplines that can better move an organization forward.  Reason #6: Pay Systems & Institutionalization.

Institutionalization is a big word and can speak to many things.  In the context of this discussion, we are talking about institutionalizing - incorporating into the fabric of the organization - desired behaviors that support an organization's mission, vision, and strategy.  Compensation is a powerful lever to institutionalize behavioral change.  In fact, attempting large-scale change without assessing and potentially modifying compensation strategies can result in little to no sustainable impact and loss of precious time, dollars, and resources.

Case in point: The CEO and COO of a global, multi-billion dollar organization decided their company wasn’t working the way they wanted it to.  The Sales force was too busy selling their personal cash cows which were last year’s news; the CEO wanted to innovate and fill the pipeline with new product orders.  The throughflow from Marketing to Engineering was murky at best, completely stalled if not confrontational at worst. Creative departments rolled up to Operations while pure cost centers were borne by departments responsible for generating revenue.  The top executives wanted streamlined; they wanted agile.  So the two of them reorganized the entire company– in less than a month.

Cut to the chase:   By and large, the reorganization took place in a MSWord document with SmartArt.  Four boxes spelling out the four core competencies of the organization were big and colorful across the page.  It looked great!  Simple, clean, easy to understand.  Yet when it was rolled out only a month after its inception, it wasn’t surprising to hear that nothing had really changed other than some departments changing cost center codes and some new supervisors put in place. Processes didn’t change and, more importantly, neither did behaviors because what had been institutionalized through culture, rewards, and time was not about to change overnight.  While there were unfortunately a number of things missing from this scenario, from the need for greater study of the core challenges to much broader participation by the executive team and beyond, one of the core reasons behaviors didn’t change is because the performance objectives (that were also tied to rewards) were not modified to align with the new organization structure: rewards were still pointing to the past.

While this was an example of (a very expensive) missed opportunity, I'd like to ask you to share an example of where behaviors were successfully institutionalized through performance & rewards.  What made the difference?  To what specifically do you attribute the greatest success?