8 - People and Rewards - The Glue That Holds it Together
PEOPLE element of organization design encompasses all things that
have to do with having the best workforce and ensuring that the
culture of the organization and the contract between workers and
the company is mutually beneficial.
It includes how and by what criteria people are recruited and hired
to work at the company, how they develop and maintain the necessary
skills and competencies, and how they are valued and managed. The
key underlying principles of the People aspect of Organization Design
have to do with designing a system that enables having the right
people, at the right place, at the right time, encourages and enables
all employees to make significant contributions that add value,
and ensures that they be highly engaged, take initiative, and be
involved in meaningful and motivating ways.
"old" way of thinking about people and work emphasized matching
an individual's skills and experience to a particular job which
was clearly defined and specified and relatively static (think job
description). In fast-paced, continuously changing, high performance
organizations, the emphasis must be on finding the people who not
only bring relevant skills, competencies, and experience but who
are also willing and able to apply them in a variety of situations
and projects. Here, flexibility and adaptability are essential,
and people are viewed as resources whose abilities contribute to
the core capabilities and overall performance of the organization.
with corporate culture becomes more important, because an employee's
ability to see what needs to be done and do it in an environment
that has less stability and structure takes on added importance.
Under these conditions, adaptive thinking, seeing and making a path
where there was none, and influencing others are critical success
factors for the individual and the organization. The "how" of these
capabilities is heavily influenced by unique aspects of company
is also greater emphasis on leadership at all levels, because
relying on and waiting for direction that comes primarily from the
top slows down organizations. Instead, vision, alignment, and engagement
of stakeholders throughout the organization enable people to act
with more initiative and speed to achieve common, well understood
aspects of the contract between employee and organization are also
innovation is occurring at ever-increasing rates, making sure that
workers' competencies are staying current is even more critical.
This includes organization, team, leadership, and business skills,
as well as the technical, because success in content arenas is increasingly
dependent on one's ability to manage organization processes.
people and organizations move and change at faster rates and structures
become flatter, individuals need to take more responsibility for
managing their own careers. Frequently, career changes will take
the form of "grow-motions" rather than promotions, i.e. changes
in scope and complexity of the work and increased opportunities
to influence or contribute rather than moves up the hierarchy.
the employment contract is based on the evolving match between organization
direction and capability and the skills, competencies, and cultural
fit of workers, this contract may be less stable and the workforce
more fluid than in the past. Increased reliance on temps and contractors
as a way to manage the size and cost of the workforce are also contributing
REWARD SYSTEM is the complex set of formal and informal incentives
that connect individual motivation, behavior, performance, and ultimately
results to the various forms of pay or compensation received
in exchange. It includes not only how people are incented and paid
but also how the underlying philosophy and principles about people
and their contributions and the goals of the organization are created
and communicated, how each individual's contribution is aligned
with and tied to organization results, and how performance is managed
and appraised. In research done on reward systems, several basic
premises have emerged:
rewards do influence motivation and behavior
reward systems must focus on what is valued in the organization
there must be a clear connection between the valued behavior/result
and the reward
if there is a discrepancy between what is espoused as valued in
behavior and/or outcomes and what is rewarded, that which is rewarded
will be the stronger influencer of behavioral choices
reward systems must be comprised of thoughtfully and strategically
integrated components in order for them to be effective
is our experience that getting the Reward System of an organization
to match and support other aspects of the organization design
is the most difficult and challenging part of the process. There
are several reasons for this:
in behavior and results are typically a desired outcome in organization
design efforts, and the new, valued results must first be clearly
communicated and understood prior to making changes in the rewards
system. Therefore, actual modifications to the reward system are
made later in the process and there will likely be period of time
during which a perceived discrepancy between what is being espoused
and being rewarded exists.
is a vast range of combinations of incentives and motivators and
of various individual responses to them. What motivates, interests,
or supports one person may not work for someone else, even if they're
doing essentially the same work. For example, the shift to a cafeteria
approach to the selection of health and other benefits recognizes
this fact. However, we have not figured out how to comprehend individual
variability when it comes to performance management and compensation.
the fact that different parts of the organizations require different
behaviors and results, most corporations insist that their reward
systems be consistent across the organization. It is difficult
to persuade compensation and benefits organizations to modify the
fundamental processes which feed and trigger the payout of certain
forms of compensation or the underlying assumptions on which they
are built. For example, most compensation systems are based on individual
performance, thus creating both subtle and overt forms of competition
among employees who need to collaborate with each other to meet
the organization's objectives.
if what you have is an organization that needs to rely on collaboration,
involvement, initiative, and synergy in order to achieve it's
objectives and result--and these days, most do--then the reward
system must include, value, and mirror these requirements. Specifically,
it will need to:
comprehend group/team performance as well as individual contribution
to the team's results,
show a clear connection between collaborative behavior and the
avoid creating a dynamic whereby people who need to collaborate
end up competing over scarce resources, including the rewards
reward change and speed, for without these, innovation of products
and evolution of the organization won't occur
closing thoughts on Organization Design: The key here it fit.
It's not enough to get a couple of the elements right, because this
is a system--all the elements need to be designed in concert with
each other in order for it to work well. Paradoxically however,
while tight fit is important, if it's too tight, it will be difficult
to modify the design and system in response to the continuously
emerging need for change.
attention to the total design of the organization (not just
its structure), needs to be as important as paying attention to
customer satisfaction or financial results, for this is the source
of organizational capability and effectiveness.
Innovative Reward Systems for the Changing Workplace by Thomas B.
Wilson (McGraw-Hill, Inc., 1995)
today's organizations seek to reduce unnecessary levels of management,
delegate decision-making authority to the lowest possible level,
and create teams with accountability for critical functions, they
are creating conflict with traditional reward systems. Traditional
thinking about reward systems focused on the external marketplace
and what was necessary to be competitive in attracting and retaining
people. In this book, Tom Wilson focuses the reward strategy on
those actions needed to implement a firm's competitive strategy.
defines a reward system as any process within an organization that
encourages, reinforces, or compensates people for taking a particular
set of actions. It may be formal or informal, cash or non-cash,
immediate or delayed. He says that organizations should develop
and implement a behavioral framework for rewards. This involves
rethinking the reward systems that currently exist.
process entails viewing reward systems as supporters, if not drivers,
of change, and modifying the concept that pay programs are just
an infrastructure to the organization. It goes beyond making sure
that people are getting paid, and includes understanding the messages
that a program sends and the behaviors it reinforces. This approach
also involves establishing a strategy for building and integrating
a set of systems, programs, and practices that reinforces the behaviors
necessary for the implementation of the organization's goals.
introduces the "Reward Smart" model, stating that effective reward
- Performance measures and feedback systems need to define what
people should do to contribute to the organization's success. There
needs to be a clear line of sight between the results desired and
the behaviors required to achieve them.
- Rewards need to make people feel valued for their achievements
from their own point of view.
- The desired actions or results need to be within the participants'
control or influence, and attainable through reasonable effort.
- The system needs to be designed and operated in a fashion consistent
with its purpose. Not only should rewards be contingent on the achievement
of desired results, the whole process must be managed in a cost-effective
- Feedback, reinforcement, and rewards need to be provided as soon
after the achievement and/or behaviors as possible. Wilson cites
data showing that an examination of employee performance in relation
to most annual incentive plans indicates that employees make a concerted
effort to achieve goals toward the end of a performance period.
then goes on to show how to redesign base pay, variable/contingent
pay, profit sharing/gain sharing, and special recognition programs
in light of the SMART concepts to encourage the collaborative behaviors
needed to serve the customer's needs better than competitors do.
He suggests developing new approaches to performance management,
and gives 10 guidelines for this new approach:
Recognize that there is a problem
Reformulate the purpose of the performance management process
Use objectives to focus activities; use goals to reinforce progress
Measure both results and behaviors
Provide continuous, real-time feedback
Make reinforcement a part of every day
Use performance reviews to celebrate and to learn
Make review meetings as frequent as necessary
Reward results and reinforce behaviors
Earn the right to skip annual performance appraisals
addition to introducing the concepts, this book is filled with revealing
case studies of companies that are successfully using this methodology.
Helpful charts and diagrams clarify the core concepts and techniques.
This book can help organizations create state-of-the-art reward
and recognition systems that really work.
and Other Resources we've found about this topic include:
is the URL for the Association for the Management of Organization
Design, a nonprofit organization that promotes the knowledge and
practice of organization design.
is the URL for the Minnesota Organization Development Network which
maintains an enormous and comprehensive data base about all things
having to do with OD. The only way we've been able to get to a specific
area, however, is through this URL, followed by clicking on "Library,"
and then on the specific topic of interest. There is a lot of information
available about compensation and rewards.
is the web site for the author of this issue's featured book review
is the web site for Schuster-Zingheim Associates who are specialists
in compensation and reward processes for high-involvement and high
E.E. Strategic pay: Aligning organizational strategies
and pay systems. (1990). San Francisco: Jossey-Bass Publishers.
book looks at the impact of pay on organization strategy and effectiveness.
Lawler is considered to be one of the leading innovators in the
area of pay and reward systems.
Alfie. No contest: The case against competition-why we lose
in our race to win. (1986). Boston: Houghton-Mifflin Company.
is a seminal thinker on the inverse relationship between rewards
of the carrot-and-stick variety and performance. His premise is
that "while manipulating people with incentives seems to work in
the short run, it is a strategy that ultimately fails and even does
lasting harm." He believes that "our workplaces...will continue
to decline until we begin to question our reliance on a theory of
motivation derived from laboratory animals." www.alfiekohn.org
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