To Change the Behavior, Change the Pay

by Roy Luebke

To Change the Behavior, Change the PayPeople perform the way they are compensated to perform. If an enterprise is structured and compensates its people to be creative, it receives creativity, or innovation, or status quo. With all the right-sizing, down-sizing, off-shoring, and Six Sigma/Lean that people have been living through for the past 20 years, they have learned to, “keep their eyes inside the boat” and not to stray too far from their defined goals and objectives.

People who are engaged in profit-orientated businesses are, for the most part, employed to perform specific types of tasks. Whether the task is on a production line or producing invoices, people develop a set of skills and sell those skills to an employer. So it should come as no surprise to anyone that the employees of a company are focused on what they are compensated to produce.

If people are not compensated or rewarded in some way to be creative, to produce changes that delight a customer, and to find new opportunity areas, why would anyone expect them to do so?

A variety of tools have emerged over the years to assist managers in directing their employees’ efforts. Key performance indicators, 360 degree performance, management by objectives. Do any of these ring a bell? Performance management should be focused on setting goals that are aligned with business strategy, extending a person’s skill set, and aligning resources to achieve business strategy. Most people are compensated based on their ability to achieve a predetermined set of goals and objectives. Managers review employee performance based on their ability to meet the goals.

Many, many words are being written currently about organizations delivering innovation. Executives are refocusing their attention on delivering new value to their customers, but how many executives are looking at the way they compensate their people? It doesn’t make much sense to tell people to be creative, to discover opportunities, to increase customer value when these same people are being paid to deliver completely different things.

If business strategy requires new products, services, or business models to extend its competitive advantage, it also requires new ways to focus and reward the people who work for the enterprise. If people are compensated based on their ability to complete tasks, it isn’t logical to also expect them to create new things unless they are rewarded and recognized for this ability.

The ability to deliver new value to the customer (aka innovation) requires systemic evolution in business strategy, culture, organizational design, and customer awareness. Employees (aka people) can and will deliver new customer value, but the way they are paid and directed must change first and then the results will follow.

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Roy LuebkeRoy Luebke is an innovation expert focused on discovering new, customer-driven opportunity areas to help define the future of a company. He is inspired by knowledge and learning, and applying structured tools and methods at the crossroads of strategy and innovation to achieve business growth.

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  1. I don’t subscribe to this idea at all. I refer you to Dan Ariely’s work that proves that bonus and rewards are only useful to a certain point and very seldom if ever useful in promoting creativity and innovation. People want to perform and see value in what they are doing. The research Ariely has done shows just the opposite of this work. If you offer too high of bonus’ or rewards the amount of creativity drops dramatically.

  2. I think this is an overly simplistic way of looking at it. Employees not engaging in creative thinking and value creation says a lot about the culture of an organisation and how it treats its people. Dan Pink did an interesting TEDs talk on motivation that I think is worth considering.

    http://www.ted.com/talks/dan_pink_on_motivation.html

    Kass

  3. I think this is an overly simplistic way of looking at it. Employees not engaging in creative thinking and value creation says a lot about the culture of an organisation and how it treats its people. Dan Pink did an interesting TEDs talk on motivation that I think is worth considering (google it).

    Kass

  4. Compensation does not have to be solely salary and bonuses. That is a filter people are putting on the word. The point is that business leaders should be finding out what motivates each individual and put together a package that more effectively blends money, time, interest, challenge, training, etc. and use the entire package to get the best out of their people.

    In the US, many professionals are now knowledge workers with much higher levels of education. Their compensation and motivation needs are changing.

    Next time someone says compensation, try to think beyond cash and look at the other motives that people have as part of their profession.

  5. I thought it was a known fact that money is a bad motivator.
    I would rather design a new way of working together than think about changing people are compensated for their work.
    I agree with the commment, that incentives should not be based on salary and bonuses primarily.

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