Compensation is just one small piece of the puzzle when it comes to performance. It’s certainly relevant, but I’ve seen plenty of instances where the influence of compensation was superseded by ego, by politics, by turf wars, by people not wanting to look foolish and all kinds of other human dynamics. It’s much less cause-and-effect than most people imagine.
If compensation was the answer to getting 10% more productivity – you’d pay somebody 10% more. But it doesn’t work that way. As we all know, human behavior is often unpredictable.
Some people you might increase by 10% and then they’re offended you didn’t go 15%, so their productivity goes down. Some people you increase 5% but someone else gets offended because they thought it should have gone to them, so their productivity goes down.
There’s just so much more to it than the money.
People want to be heard. They want to be able to contribute. They want to have a say about how things are going. An interesting perspective on this is to consider the role of compensation within volunteer organizations. People aren’t paid with dollars, but they benefit on other levels.
What if everyone in your organization was working as if they were volunteering? What if everyone was working based on the non-monetary reward they received…the emotional, psychological, whatever? That’s an extreme perspective but it’s a good tool that allows you to think about how to include and interact with people outside of the narrow territory of compensation. It opens the door for better explanations on discretionary effort beyond…well, she makes more; that’s why she’s working harder.
There’s an organization I’m working with today that has are two departments that aren’t working together at all. There are no dummies in this organization. They’ve lined up the compensation so that each of them can reach their goals only when they’ve partnered effectively with one another.
Each person gets a 4x bonus at the end of the year on top of their base salary. That’s 4 times, not 4%. It’s crystal clear. Yet, these guys bash each other in meetings. They talk behind each other’s backs. They don’t trust one another. They don’t partner.
They literally walk away from significant income rather than figuring out how to work one another. It’s costs them, and it costs the organization. So yes, compensation deserves a place at the table when you’re reviewing your strategy. But maybe only for the first course or two. Your real leverage is elsewhere.
Coming up in my next post: how to shift the mindset within your team to create greater commitment and engagement.
