Paying more to an unknown angel

Ironically, the less we know about potential hires and their propensity to contribute to an enterprise, there is a greater probability of them being incentivised in terms of rewards, remuneration and compensation!

Peter L. Allen, an alumnus of McKinsey’s New York office, is currently the vice-president for people and organisation development at Agoda.com, a subsidiary of the Priceline Group.

His company is more liberal while hiring talent, especially those that provide a significant competitive advantage to the company. Managers and department heads are given guidelines to decide on the compensation package, but there is no upper limit. Though, department heads have an incentive to be conservative with pay packages, the company does encourage them to pay more than it first proposed to do.

This approach leads to inconsistencies in the pay of employees who are nominally at the same level. However, the company claims it is willing to accept this outcome. It believes that the resulting improvement in company performance benefits all of their employees.

However, paying top dollars to a new employee is not always the answer to talent management needs.

There is no doubt that motivation is the crux of good performance, but there is no clear-cut answer to the question of how to motivate. While there are several theories on motivation and practices, there is no getting away from money. Money is the most important and the biggest motivator.

It may be an obvious statement, but it still needs to be told. In the context of Abraham Maslow’s concept of the hierarchy of motivations, once basic human needs for security and economic well-being are met, people seek to satisfy their higher needs. But managers do know that economic incentives have not lost any force despite the relative affluence of employees in many countries and companies.

Peter Drucker observed, as far back as 1974, that ‘there is not one shred of evidence for the alleged turning away from material rewards. Anti-materialism is a myth, no matter how much it is extolled’.

In fact, economic rewards are taken so much for granted that their denial may act as a demotivator to employees.

There’s evidence of this all around us. Sports players no longer play for their own countries, but go to the highest bidders. Professional tennis players have in the past refused to play at Wimbledon, the Vatican of lawn tennis, because the rewards were not attractive.
It is no different in the industrial world. Strikes for better wages, pensions, inflation- proof salary and rewards still take place. All this despite the claim of psychologists that security and self-actualisation are the prime needs of a person.

Has the sense of values changed with time? We are not concerned here with the philosophical angle, but with the hard facts of life in a commercial world. Self-motivation can go only so far and it needs to be constantly reinforced by rewards. In particular, merit must be measured and rewarded regularly, if it is to be encouraged and sustained.

Good human relations cannot compensate for insufficient monetary rewards. Take a look at Starbucks or Wal-Mart. They drive their people to work through an inner motivation to serve their customers; and yet they pay a fair wage, however minimum it may be. Many companies have, therefore, learnt to expand the idea of compensation with the help of gain-sharing schemes, lifestyle-building rewards, deferred gratuity, benchmarked job value pay, knowledge pay, and development and learning compensation.

Tropicana is the world’s leading producer and marketer of branded fruit juices. It accounts for more than 41 per cent of the $ 5 billion US chilled-juice category with continuous innovations in production, packaging, marketing and distribution. It motivates its employees by:

(a) Discussing and agreeing on both internal and external principles and benchmarks to be achieved.
(b) Establishing a rewards programme during a collaborative discussion to incentivise partners and internal customers.
(c) Quantifying the financial return from a collaborative relationship, both in terms of intangible and tangible benefits.
(d) Communicating the benefits and rewards for performance to internal and external partners.
(e) Driving greater success through continual resetting and re-evaluation of goals.

The Leadership Management Institute (LMI) headquartered in the US, operating in over 70 countries in the last 43 years, has mastered the art of sharing wealth through a system of professional partners, operating with a near similarity to the Amway model of distribution and sharing of profits.

The key components of an employee’s work experience are acknowledgement, work-life balance, culture and competency development. A balanced weight on these factors overwhelms.

To be effective in rewarding right, companies have to define more precisely their organisational objectives so that employee behaviours and culture will help them achieve their ultimate business strategy.

To fulfil these organisational objectives and understand their implications for human resources, reward systems must have several characteristics: They should be attractive enough for hiring, retaining and motivating the best available talent to continuously perform on a sustained basis. The system must also be equitable — and, more importantly, be seen to be equitable. Reward systems that have been designed with the fairest of intent, when administered, leave perceptions that do not fulfil this criterion.

On the other hand, even while being equitable, the system should be able to trigger individual and team performance. To ensure the objective of organisational learning, individual learning that would translate itself into organisational learning has to be incentivised.

To focus on short- and long-term earnings, it helps to have the competency compensation budget and disbursement in the same currency and exchange rate as is applicable to the company’s business plan and budget. This is to offer fairness: if the sales and profit budgets are in US$-denominated targets, then the competency compensation plan/budget as well as its disbursement should be in the same currency. Finally, to ensure the organisation’s objective of perpetuity, the competency compensation system must facilitate the lifestyles of employees.

Workforces in organisations are shrinking and each employee is now expected to add distinct value to the business. In addition, the increased emphasis on technology, quality and service, results in the business world changing from a mechanised workforce to a knowledge workforce. The latter is expected to take decisions, face risks and respond instantaneously to opportunities. This behaviour has to be rewarded differently. Performance is no longer a lifelong contract of commitment, but one that has to be continually reinforced.

Changing organisation structures also necessitate changing competency compensation practices.

Effectively, there is also a need to retain and reward such employees who wish to be retained. It is an impossible task for an organisation to find individual reasons to make people stay and pursue a career in a long-term context. In today’s scenario, careers in themselves do not necessarily mean long-term association. Organisations need examples like Unilever, Citigroup and LMI where people are empowered to get out into the market or workplace and make things happen. In doing so, they should gain a combination of intrinsic and extrinsic rewards. One cannot do without the other.

(The author is a managing partner & lead for North America, Talent Management Platform Solutions at TCS Canada Inc.)