The Truth About Paying for Performance
One of the great myths of corporate life is that incentive pay leads to better performance. Corporate leaders often speak with great moral conviction of creating pay for performance cultures that only reward people when they meet performance expectations. The logic suggests that if organizations provide a big enough carrot, people will work harder to achieve the results required to get it. The organization wins because they get the best effort of employees for an optimized level of expenditure. Employees win because they are rewarded for their effort.
Who can argue with that?
The problem, however, is that it does not really work that way. The truth about the pay-performance relationship is that the same reward structure can have positive or negative effects depending on whether rewards are distributed based upon performance or politics. As you might expect, when pay accurately reflects actual performance, incentives can lead to greater productivity. But when pay in any way reflects organizational politics, the results are the opposite.
Unfortunately, political influences tend to creep into compensation systems because organizations often rely on subjective ratings for their measure of employee performance. Even when performance criteria are modified with standards and elaborate descriptions of goals, ratings are still subjective because the interdependencies in most work environments make it virtually impossible to establish indisputable cause and effect relationships between individual performance and results. And as Dan Pink implies in the above video, there are very few jobs in today’s economy that are so isolated and routine that they can be evaluated solely on the basis of objective measures.
So what’s the answer? Navigate the imperfection. That likely does not provide solace to those who want certainty, but it offers a solution that can strengthen the relationship between managers and employees. Instead of hiding behind the lie of pure pay for performance systems, own the imperfection and teach work groups, managers and employees to have better ongoing conversations about how to achieve results. Instead of hanging firm performance on pay systems that may work against motivation, create an environment that nurtures intrinsic sources of motivation, such as autonomy, mastery and purpose.
Stop over engineering pay systems hoping for a miracle and remember that pay has its place. It’s just not first place.
Going Deep
Change can be a moving target. When observed solely from the surface, navigating the waves of organization transition can feel like an unpredictable thrashing of human emotion that disrupts smooth sailing toward our desired objective.
But that’s really just a problem with our perception. It represents our failure to understand the deeper, more nuanced needs that often go unexpressed until roused by the anxiety that accompanies a change to the status quo.
It’s our job as change leaders to go deeper. It’s our job to resist our own temptation to respond to every outward reaction. Instead, we must listen to understand the inner needs expressed by those reactions and use our understanding to provide a patient, steady ballast that helps others face the uncertainty.
Smart change requires the perspective acquired only by going deep.
The Social Impact of Innovation: An Interview with Charly Kleissner
Thank You, Steve Jobs!
Stop Hiding Behind Jargon
One of the surest signs that change leaders don’t know what they are doing is the excessive use of jargon. It’s easy to spot. Just listen for words like strategic, alignment, partnering, values, sustained, vision, execution, branding, methodology, governance, scalable, global, integrated, empowerment, enablement, or any other intelligent-sounding, yet empty clichés that assume speakers have the right answers and listeners should feel assured.
Jargon epitomizes the use of karaoke leadership1. Dreary leaders without a shred of inspiration can have the false security of instant, plug-and-play success. Here you go, pick up a microphone and read this script. It’s safe and well produced and gets heads nodding and crowds whooping with lighters in the air. You are a business genius. You are a rock star.
Business leaders are not the only ones who are susceptible to the empty-headedness of jargon. Listen to politicians talk about unemployment, for example. The policy discussion on both sides of the Atlantic is filled with the rhetorical jargon of the policy extremes. The conservatives talk of “fiscal responsibility,” “tax cuts,” and “deregulation.” They say that the long-term unemployed “don’t want to work” or they “lack the necessary skills.” The liberals, who have been noticeably silent of late, talk of “job creation,” “retraining,” and the need for “compassionate leadership.” Meanwhile, 14 million Americans are jobless, and millions more are staying afloat with part-time work that fails to use their skills. The situation is even worse in Europe where countries like Spain are experiencing 21% unemployment.2
The jargon on both ends of this debate gives the appearance of strong leaders taking proud, principled stands. But that’s the problem. They just keep standing. And standing. And there is never any action. There is never any real change.
Jargon is a tool of dominance. It creates distance. It marginalizes. It forms a barrier that blocks open communication. It limits innovation and thwarts authentic, grass roots problem solving.
Worst of all it fools change leaders into thinking they can hide their ignorance, their uncertainty and their fear. They can’t. Listeners are smarter than that. Whether employees, customers or citizens, they eventually see through the gibberish. They know that complex, large scale change is imperfect and messy, and that’s okay. That’s part of the deal.
Include others by speaking directly and in plain language. Truth helps people get beyond the guesswork and confusion and on with the business of managing reality.
- Karaoke leadership. I borrowed this concept from Malcolm McLaren’s presentation “His Life, Authenticity vs. Karaoke Culture.” McLaren was the designer, producer, and founder of the Sex Pistols who died in April 2010.
- From “Against Learned Helplessness,” by Paul Krugman, The New York Times, May 29, 2011.
Context is Everything
At 7:51 am on January 12, 2007, a man wearing a baseball cap, T-shirt and faded jeans entered L’Enfant Plaza in Washington D.C. amid the morning rush of commuters and quietly removed his violin from its case. The violin was the rare Gibson ex-Huberman handcrafted in 1713 by Antonio Stradivari during the Italian master’s “golden period,” when his technique had been refined to its highest levels. After tossing some seed money into the case to encourage those passing by, the man lifted the violin to his chin and began to play the beautiful “Chaconne” from Johann Sebastian Bach’s Partita Number 2 in D Minor, considered one of the most difficult pieces to master.
On this particular morning, however, the violinist was not your ordinary street musician. It was Joshua Bell, thought by many to be one of the finest violinists in the world.
Of the nearly 1100 commuters that passed Bell that morning only seven stopped to listen and only twenty-seven gave money. Just three days earlier, Bell had played to a sold-out crowd at Boston’s Symphony Hall where mediocre seats cost $100. Bell usually earns around $1000 per minute, but his earnings that morning amounted to a little over $32.
“It was a strange feeling,” Bell said, “that people were actually, ah . . . ignoring me.”
Context is everything.
Bell’s performance was arranged by The Washington Post as an experiment in context, perception and priorities as well as an assessment of public taste. They wanted to answer the question, “In a banal setting at an inconvenient time, would beauty transcend?”
This is the same question we face every time we implement change. And the answer is a resounding “No!” If change is not framed in the right context then the organization will never see the beauty of the solution.
Researchers Achilles Armenakis, Jeremy Bernerth, Jennifer Pitts and Jack Walker identified five important precursors that determine the degree to which change recipients accept the context required for successful organization change. Assessment of these factors can help to gauge the degree of buy-in and determine the specific gaps in contextual understanding that may impact the success of your initiatives. In addition, these factors can serve as basis for planning and executing actions to enhance the understanding of change recipients.
As you manage your change efforts ask whether your stakeholders believe the following factors to be true:
- Discrepancy. The belief that a change is needed. The belief there is a significant gap between the current state of the organization and what it should be.
- Appropriateness. The belief that a specific change designed to address a discrepancy is the correct one for the situation.
- Efficacy. The belief that the change recipient and the organization can successfully implement a change.
- Leader Support. The belief that the formal leaders (vertical change agents) and opinion leaders (horizontal change agents) in an organization are committed to the success of the change and that it will not be another passing fad.
- Valence. The belief that the change is beneficial to the change recipient.
The Leadership Power of Vulnerability
Earlier this week I was sitting in a town hall meeting held by the head of human resources for an organization going through a major overhaul of its HR function. The audience was a collection of HR professionals from throughout the world gathered in person and via the web to hear about state of affairs with the massive change that had begun a few months earlier.
The audience waited anxiously expecting an announcement of inevitable job loss, but also hoping their leader would share a vision of a modern, effective department whose contributions were prized by the organization.
Instead, the SVP droned for thirty unfulfilling minutes spouting meaningless clichés about tackling the “low hanging fruit” (eight times) on their way to having a “seat at the table” (five times) where they could be a “strategic partner with the business” (six times). He stumbled through his too-detailed slides in a lifeless monotone with a stiff back and an empty facial expression. Detached. Distant. Not revealing anything of substance.
The feedback from the audience after the meeting suggested he failed not only to provide any meaningful information, but more importantly to make the connection required to get anything more than dutiful compliance to the task ahead. The comments after the presentation ranged from the politically correct (“I think his plan is still developing”) to the skeptical (“I’m not sure he fully understands what’s required”) to the confused (“I’m not really sure what the heck he said”) to the hostile (“He doesn’t have a clue”).
He will need much more than that to get the focus, energy and commitment required to complete the effort.
Now, imagine the difference if he stood at the front of the room, took off his jacket, sat on the edge of a table and said:
“Our business has changed a great deal over the past decade, and it’s clear that the HR function that brought us to this point needs to change to support our company in the coming years. To help us identify the right steps to take, we hired some experienced advisors to share their insights and present us with recommendations. I would like to say that I understand all that we need to do, but I’m still learning about these new tools, processes and structural changes and what they will mean for us. What I do know is that with your help, we will be able to make the right decisions—even the tough decisions—that will take us in the best direction. Now, let me share with you some of what I understand and where I am still learning.”
Our instinct during times of uncertainty is to domesticate reality. We try to put life in a box where we can control it and we hide behind platitudes hoping that the appearance of certainty will bring comfort to those around us. The result? We appear inauthentic and we put distance between ourselves and those we are trying to lead.
Instead, we must learn to live with a robust and confident uncertainty. Only by allowing ourselves to be seen, showing our own vulnerability, will we draw others close enough to engage in the creative, collaborative process of facing the unknown.
