Can you PAY people to get them motivated?

We have this interesting term called pay for performance. It might make you think that you could pay people to motivate them to perform better. Research after research (28 total) have been completed that show that extrinsic rewards decrease intrinsic motivation. Rewards do not directly increase performance. Rewards have a distinct role in talent management; however, we should understand what their purpose is to be able to get the most out of the investment.

NO – You can’t motivate people with money.

A well known motivation theory by Herzberg categorizes motivational factors into two categories: Motivators and dissatisfiers, also known as hygiene factors. Motivators such as career development and meaningful work can increase the employees’ motivation. Hygiene factors can only reach a neutral level of satisfaction. If they are good, nobody thinks about them. If they are lacking, they cause dissatisfaction. Compensation falls into this category.

YES – You can motivate people with money

You could say that it is possible to increase motivation with money, if you are in the area of dissatisfaction – if they are underpaid. You can improve the compensation, until you reach the neutral level. After that, pay becomes a non-issue.

There is also one exception to the pay-reward connection. Some research suggests that in work that is repetitive and doesn’t require much thinking or judgment, pay actually has a direct link to performance. How many of today’s employees have jobs like that?

What’s the point of pay for performance then?

We pay our best performers because we want to KEEP them. Increase in compensation significantly increases the intent to stay. When the organization is dishing out rewards, the operative question should be: Who do we want to keep? Pay for performance is often expected by employees as well. They feel that it is fair that those who contribute the most should be rewarded the most. It is essential that what is perceived as good performance by management is perceived as good performance by the employee base. Clear performance standards are one of the strongest drivers of performance.

If you can’t motivate people with money, then what?

That’s another story, read here.

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Talent management in high tech – Part 1: Talent acquisition, rewards and performance

 

Source: Bersin & Associates

 

Bersin and Associates just released their new framework for talent management. In my opinion, it’s an excellent illustration of what’s involved in building a high performing workforce. You start with the workforce strategy. You attract the right talent that fits your plan. You manage performance, select the rewards that fit your strategy, and develop your employees. You create the right environment to engage your employees. You develop managers and groom leaders. You shape your culture to win. When you optimize each building block, just listen to your organization humming. Each industry has its own challenges and advantages. In today’s and next week’s blog I will examine high tech.

High tech is characterized by its highly skilled workforce. Often the entry level expectation is at least a bachelor’s degree. In engineering, there is fierce competition for some specialized talent, whether it is a certain engineering field, or a rare combination of software language skills. In marketing and sales, the companies are looking for the sweet spot of technical background and functional expertise, trying to find the right balance between the two. In many instances, a complex sales process is involved, which requires business acumen, seasoned opportunity management and the account management skills of the sales people. As in many other industries, if the high tech company manufactures it products, its logistics function, support staff and managers must be increasingly familiar with outsourcing and off shoring. As the applicants are tech savvy, more and more recruiters are turning to social media to source the candidates.

As the applicants are screened, a high IQ is just table stakes. What differentiates candidates is their EQ – emotional intelligence. High tech companies develop new products in a team based environment with tight schedules. Hitting the market window is critical for revenue and profit targets. The employees must be collaborative and able to adapt to change and a fast pace.

When it comes to rewards, most high tech companies’ reward philosophy is pay for performance. Merit increases, bonuses and equity are distributed based on the performance levels of the employees. This creates some requirements on the performance management process and management skills. The stakes are higher for a fair performance evaluation, when the employee’s compensation is linked to the manager’s assessment. Many companies use some type of forced or guided distribution to be able to manage their rewards budget – not everyone can get the highest rating and richest reward package. Manager training and guidance on consistent performance standards is another way to get the ratings closer to a normal curve. When forced distribution processes are not managed and communicated well, they pose challenges in creating a competitive culture and a perception of internal politics, and some high tech companies have faced employee lash out on this practice.

Next week: Talent management in high tech – Part 2: Management development, succession planning, culture

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How to get a raise

2009 was a year we want to forget. Adjusted for inflation, total compensation in the USA fell by almost 1.3 percent. 2010 looks a bit better, but not much: a salary increase forecast conducted by The Conference Board projects modest budgets of 2.8%, barely enough to match the inflation rate. In this environment, what can you do to get that coveted raise? There are no silver bullets, but the answer lies in knowing the process, studying the criteria and applying self awareness.

There are different approaches to compensation strategies in organizations, such as flat inflation adjustments, seniority systems, competency based increases, but performance based pay is the king. It makes sense; the best performers get the best compensation. In this year’s case, the performance based companies will take their 2.8% increase budget and try to divide it so that low performers will get nothing, solid performers will get a little bit, so that there is some extra money accumulated to give a more handsome reward for the star performers. It sounds straightforward, but many complain that they are not being evaluated fairly. Herein lies the challenge: 90% of employees feel that their performance is above average. So, how do you know if you REALLY are above average and deserve the key to the treasure chest?

If your company is in a mature stage, it has clearly defined standards for different performance levels. These would describe how a top performer behaves versus a solid performer, and what constitutes performance below expectations. Sometimes, you can dig in further and find the listed company leadership values. If you can’t find any published criteria, here are some generic tips how to distinguish whether you are a true top performer vs. a solid performer:

• Top performers are part of a solution. It’s not that they don’t see problems or are yes-men. When they see a problem, instead of just identifying the issue, they think of possible solutions and volunteer to be involved in implementing them.
• Top performers are proactive. Instead of just doing a good job at fulfilling requests and completing goals, top performers clearly see the overall strategy and purpose of the company, and jump at opportunities to do things beyond their current tasks, as long as they are aligned with the current priorities.
• Top performers are change agents. In new initiatives, top performers not only go to training and follow the new rules, they embrace the change vision and evangelize the cause. If there are issues, they find workarounds instead of just pointing them out.
• Top performers are continuous learners. They ask for feedback and act on it. When they go to training, they are engaged. When they get back to work, they share what they learned with the team and apply the new skills on the job.

Just as a word of caution, here’s a tell-tale sign how to recognize if you might be a low performer: you consume a lot of your supervisor’s or HR’s time. Unless your time with your manager is proposing ideas that you are volunteering to implement, you are taking time away from productivity. The only other exception may be if you are reporting illegal or unethical activities; that is your right.

Get savvy about your company’s performance management and compensation processes. Know the criteria for decisions. Find out about the schedule and decision points. For example, once the merit increases have been approved by senior management, your chances of changing your manager’s decision are slim. Your manager and HR are your best sources of information. Use the processes to your advantage and don’t be afraid of them. Document your performance throughout the year and make sure that your manager, the next level management and HR are aware of your accomplishments. Network internally so that the decision makers can connect a name to a face.

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If you are a manager, don’t let the rewards planning time to go to waste. With the little budget that you have, make it count:

• Make sure there are no surprises. Your performers should know where they stand based on the informal feedback you give throughout the year.
• Be as transparent as you can be about the guidelines and how the compensation decisions are made. Clear expectations upfront set the stage for frank discussions.
• Make sure to celebrate the successes with your top performers and show how much you value them. The reward dialogue with them is a great opportunity to do so.
• Don’t forget to share how much you value your solid performers. Show them what it takes to be a top performer.
• Don’t cop out with your low performers. They should not be surprised with what’s in store for them.
• Don’t forget that compensation can only be a dissatisfier. Leading with purpose, giving feedback and developing your employees ultimately drive their engagement.

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Copyright 2010 Liisa Pursiheimo-Marcks, all rights reserved.
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