Reason 8: Pay is Visible and Tangible

2/28/2013

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.

"Including compensation in organizational change efforts is akin to an organization 'putting its money where its mouth is.'"

As with any of these ten reasons for the connection of compensation and OD, there are instances in which a pay or pay policy change simply doesn't make sense. A team building exercise for a group of IT technicians who had historically been at each other's throats may very well not require a change in their compensation or a compensation initiative (although I would certainly be looking at their objectives to ensure they were aligned). On the other hand, with the introduction of team incentives in tandem with behavioral interventions to root out the core issues, each member would see that the organization was taking the health of their team seriously - all the way to their bank accounts.

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?

Woodruff Imberman link

3/5/2013 12:01:57 am

Imberman and DeForest conducted three national surveys in the 10 years: how executives were motivating workers to improve their performance -- what worked, what didn’t. Not surprisingly, we found growing numbers of workers are firstly motivated by basics – security and pay – and only secondly by employer efforts using “employee engagement” fads.
In 2002, we visited 400+ companies, asking those questions. We repeated in 2008 in the Great Recession, and again this year, during the sullen recovery.
Four facts stood out:
• One, due to the Recession, workers focus on basics: job security and economics -- the size of the paycheck.
• Two, short-term economic motivators like Gainsharing matching workers' short-term horizons had the most impact on productivity.
• Three, workers expect “extra” rewards for any “extra” efforts asked of them. Meeting this expectation is key for long-term success in any new initiative to boost productivity or eliminate waste. If the “extra” is absent, so is worker cooperation.
• Four, while many employers redoubled efforts to influence employee behavior with “engagement” fads, workers said they were secondary. Economics are first
Execs found short term, clear economic motivators paired with supporting communications most effective for productivity. They improve worker performance, boost paychecks, and show workers they "own" their own destinies -- the smarter they work, the better their future.
MOTIVATORS: WHICH ONES WORK…AND WHY?
Non-economic motivators do bolster workers’ pride: parking places, service awards and lunches, recognition, and Xmas parties, etc. While they offer little positive motivation, their absence is resented. They should continue even though they have little direct effect on workers' daily efforts. Many execs think discretionary year-end bonus programs are quite effective. Not surprisingly, year-enders don't focus employees on performance today. Tho liked by workers, few can answer: “Just what did you do to earn your year-ender, and why the amount you received?”
EFFECTIVE MOTIVATORS
Economic motivators affect daily behavior if they are simple and match the short horizons of workers they aim at. Few have a “line-of-sight” long enough to equate today's results to an ill-defined year-end bonus, to say nothing of profit sharing at retirement.
Execs said pay-for-performance programs with frequent payouts supported by active communications are most effective in “engaging” employees to focus on productivity and to reinforce their desire to cooperate.
GAINSHARING FOUND TO BE THE EFFECTIVE PROGRAM
The surveys found Gainsharing the most effective short-term motivator of all. It is a group pay-for-performance plan by which worker performance is quantified, given a dollar value. When it climbs, the value of the improvement is split with them. For every dollar paid to workers in Gainshare bonuses earned by better short-term performance, a company saves a like amount in higher productivity and quality.
“ENGAGEMENT” – THE FORGOTTEN SIDE OF GAINSHARING
Effective Gainsharing plans require "engagement,” i.e., active communications to “engage” workers to cooperate.
Employees want to earn extra money. Although none said communications was a motivator, it was at the root of satisfaction. With Gainsharing, frequent communications on performance “engaged” them to keep productivity high, their jobs secure. Workers want to contribute. When management seeks their ideas for working smarter, they know their efforts are important – and valued.
SUMMING UP
Astute execs are first providing group economic rewards for working together to achieve productivity goals; and second, they use effective communications to reinforce the economic motivators.
What are you doing about this?

Mercedes link

4/1/2013 03:23:46 pm

Hi Woodruff

It was great to start a dialog over email, yet I wanted to be sure and respond to your thoughtful comments here as well.

I read your article, “How to Produce Productivity.” Thank you for sharing this information. If I’m not mistaken, the population of the study is primarily skilled workers in the wire forming and spring making industry. And for skilled workers, I agree with you that short-term economic rewards like gainsharing can be highly motivating. Having said that, I believe there is also a required sensitivity of economic motivators based in part on the population. Certain non-economic factors (e.g., training & development, stretch opportunities) can be very motivating for many employees.

I absolutely agree that communications are key, and would say that as the business needs and employee motivations are being assessed, the communication strategy is being developed right alongside. It makes sense that employees didn’t see communication as a motivator in and of itself. Rather, it is the mechanism to deliver the strategy and results and the personal (and ideally positive) impact to the employees.

Thank you again for your input.
Mercedes

Comments are closed.

Reason 8: Pay is Visible and Tangible

My POV

Archives

Categories