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?

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?

We are in the midst of a series that looks at the ten primary reasons for filling the space between the disciplines of Compensation and Organization Development for greater organizational effectiveness and employee empowerment.  The list of ten reasons comes from Dr. Ed Lawler's seminal work on the subject, Pay and Organization Development (Addison-Wesley, 1981).  We come to reason #4: Pay is Important to Individuals.

As most of us know, there continues to be much-heated debate as to whether pay really motivates people, or whether it is solely a demotivator if the compensation levels are off.  In the oft-quoted Daniel Pink's Drive, we are told that knowledge workers specifically are motivated by mastery, autonomy, and purpose.  While I am oversimplifying Dan's message, I think we are experiencing another both/and paradigm where people are motivated by intrinsic needs and extrinsic financial reward, whether manual labor workers or C-suite executives.  The extrinsic financial reward allows the individual to further meet certain intrinsic needs (e.g., one desires for their children to be safe and the bonus allows the family to buy a sturdy mini-van to protect them on the road).

Case in point:  Rewind just a few weeks back to New Year's Eve  at 11:07 p.m.  I have just arrived back home from a trip to the veterinarian emergency room with my Pug, Oliver.  Not three hours prior I felt the sofa I was sitting on vibrate.  Subtle, yet enough to catch my attention.  Sam, Oliver's brother, was on my left and Oliver was on my right.  I put my hands on both of them, and sure enough Oliver's little body was shaking with every exhale.  This was out of character and pointed to something being off.  This was not Oliver's first trip to the E.R., and we have never walked out of there for less than US$500.  It was closer to US$2,000 for the time we found out he was fatally allergic to bees.

Cut to the chase: I love children, yet my husband and I don't have any of our own.  Sam & Oliver have become our surrogates. And, as parents would do for their sick children, we have done what was necessary to cure our dogs of - or at least mitigate symptoms of - their ongoing ailments.  As ironic as it seems given my background in Compensation, money has been less important to me than other more intrinsic factors.  I personally see money less as a signal of importance or self-worth and rather more as provision: provision for our choice of lifestyle, including very expensive healthcare for our dogs.  To that end, while I am not predominantly motivated by extrinsic financial rewards, compensation is still very important to me and I can articulate why.  I want to work hard and get paid fairly for the value I provide so that I can afford the things that are priorities in my life.

How is compensation explicitly important to you?

(p.s. For those of you who are wondering, Oliver will be okay.  His poor little back is just getting old with the rest of him.)