The Paradoxes of Corporate Life: Compensation, Part 3

 And so we come to the SYSTEM.

There is a system in place that operates on the assumption that money is a good motivator.  I think I already established that fear of death is not a good motivator (http://odracir72.livejournal.com/14524.html).  So, if Death herself cannot motivate most people to make positive change in their lives, then why on Earth should we expect money to do any better?  Well, the truth is that it doesn’t.  I have known this intuitively for years, but I’m finally finding that there is bona fide scientific data to support the idea.  Recent evidence: this wonderful talk by author Daniel Pink (http://www.ted.com/talks/dan_pink_on_motivation.html) about the science of motivation.  In this talk, he explores the statistical and experimental data that demonstrates that individual performance is not positively influenced by monetary reward.

I know, I know…what the heck am I talking about, right?  In this day and age, these are dangerous words to speak and to write.  It’s probably very easy for me to have these thoughts since I have a job and can feed my family and protect them from the environment.  But that’s just the point.  Improved performance isn’t guaranteed by a paycheck; a paycheck simply positively reinforces the minimum effort required to keep one’s job.  NEWSFLASH: this isn’t groundbreaking information.  This is how the system has always worked.  People tend to do what they need to do in order to keep their jobs.  That’s the minimum standard.  Superstars emerge not as a result of compensation but as a result of a mix of some inherent characteristics of the individual plus alternate forms of positive reinforcement.  Personally, I think the most important component of stellar performance comes from within the individual.  It’s an intrinsic form of motivation that transcends external reinforcement.  Motivation, though, is a topic for another today.

The paradox of the prevailing view of compensation in most corporations is that the intended result (increased performance) is not positively correlated with the intended motivator (compensation).  So, corporations spend way too much time focusing on money as the carrot to dangle in front of the employed masses.  Ratings, pats on the back, public recognition, and other forms of reinforcement are under-utilized.  The logic is that all people really want is money.  But, as I once told someone, if you spend your life chasing after money, you will never be happy.  In the end, money allows individuals to afford survival.  With a little more money, all you get is the ability to buy more stuff.  And that just increases the cost of living, the cost of “survival.”  There is no long-term satisfaction in that.

Years ago, I remember busting my ass at work.  I did everything I was asked, and then some.  I came in early.  I stayed late.  I toiled and toiled and toiled.  I managed more people than I’d ever managed before.  I made my boss look good.  I made my boss’ boss look good.  I bent over backwards and drove myself hard.  The net result?  A “satisfactory” rating.  I received a raise that was more generous than what I expected given the review I received.  I was flabbergasted.  I was confused.  I was pissed.  I was disillusioned.  As a result, I decided to cut back, to not push myself so hard.  I cut back on my hours.  I stopped trying as hard.  I started being more of myself and less of the puppet that I had allowed myself to be.  A funny thing happened: in the process of freeing myself from the albatross of financial incentives, I found myself.  I found my voice as a leader.  I refined my style.  I figured out that the best “me” at work was the “me” that I was outside of work.  In essence, I stopped caring so much about the money and focused more on other stuff.

I’ll be damned if I didn’t get a higher rating the following year.  And do you know what?  I got a slightly higher percentage that next year.  And do you know what?  I was even more annoyed than I had been the year before.  It became clear to me that the SYSTEM was out of whack.  It was disconnected from what I actually did and how I actually did it.  It proved to be lazy.  It proved to be a shortcut.  Not only was there not a positive correlation between my sense of accomplishment and the attempt at motivation on behalf of the corporation, there wasn’t even a positive correlation between my actual performance and the subsequent increase in compensation!  Do you get it?  What the company said I was worth had nothing to do with how much I felt I was worth.  THAT is a potentially dangerous disconnect.  That’s how companies lose talented employees.  

What I would offer is this: make compensation about helping employees provide for their families.  Don’t make the yearly salary increase an event that is meant to reward someone’s performance for a year.  That’s a ridiculous idea.  It implies that the system can be gamed by someone who is sufficiently manipulative.  It lends itself to psychological phenomena like the recency effect in which a human observer tends to recall that which occurred most recently.  It also lends itself to the intensity effect in which an observer tends to recall more intense events over less intense events.  Or hierarchical effects in which a director or assistant vice president can “weigh in” on an evaluation of an employee and skew the final rating in favor of their personal opinion of the individual.  These are all very real phenomena, and they impact how these evaluations and subsequent increases in compensation can wind up.  

This isn’t necessarily an answer, but it’s a place to start.  I think the conversations need to take place, though…the ones that finally lessens the gap between what science knows and what business does.