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Compensation pundits frequently suggest that the "right" reward system will drive performance by motivating workers to achieve new levels of performance. But rewards alone don't drive organizational behavior. In an age where loyalty is dead and at-will employment reigns, free agent workers are looking for currency that involves more than just pay. That's why successful managers are exchanging the old reward system for "new age currency," one minted in the five denominations of responsibility, respect, relationships, recognition and rewards. And, while it may not look like greenbacks, pesos or euros, rest assured you can bank on the results.
Few jobs are designed with a specific employee in mind. Job descriptions are more like extensive to-do lists with a catch-all phrase at the end, such as "… and other tasks as directed by management." The underlying message is, "Do whatever I tell you," which shifts the responsibility of the job to the manager, not the employee. By creating a job description with your employees that profiles the work processes and desired outcomes, you empower your employees by assigning them accountability and responsibility. For example, Henry Ford was known for his straightforward approach to partnering with employees in designing jobs. He reportedly would take a difficult production job to the "laziest" (substitute "most resourceful") worker on the line to see how many shortcuts would be taken. To be sure, workers involved in this way felt valued and took full ownership for the production process once it hit their station. To encourage responsibility, take the following steps:
Jeffrey Pfeffer, Ph.D., a professor at the Stanford Graduate School of Business, maintains that organizations with "pro-people practices" tend to perform up to 40 percent better over time. Such organizations include Southwest Airlines, Men's Wearhouse and Toyota Motor Manufacturing. "Respectful" organizations build cultures of continuous learning, teamwork and genuine caring and concern for all key stakeholders—employees, customers, communities, suppliers and investors.
In these kinds of organizations, performance review systems are aimed at building confidence and competence, unlike other systems seemingly designed to restrict pay increases and root out some percentage of the workforce regardless of their value.
Information—the lifeblood of every knowledgeable organization—flows freely throughout the system, as people are valued and respected for the intellectual capital they contribute. And, prudent risk-taking is encouraged in the interest of building excellent organizations. Managers attend to and show they value feelings, ideas and actions. People are appreciated not only for what they know and do but also for the emotional intelligence they bring to the organization.
Even if your organization isn't into "pro-people" practices, you can follow that model with the people you lead, with the following tips:
If you recall your childhood school days and some of the styles of your teachers, you'll probably remember what was productive and counterproductive in motivating you. The strict disciplinarian who taught by fear and intimidation never focused on the "joy of learning." On the other hand, if you had a teacher who used a constructive strategy that focused all attention on the process of discovery and personal development, you learned to think for yourself and to strive continuously for rewards of enlightenment and mastery. Similarly, the strategy of the effective manager is one of facilitation and education.
Because motivation is an inside job—something individuals choose to unleash under the right circumstances—the effective manager must focus on creating environments that are conducive to workers getting motivated. Coaching, teaching, supporting and guiding—all are strategies that have the best chance of producing the right outcomes. And above all, being authentic, honest and ethical is absolutely critical. Indeed, the No. 1 attribute of leaders most valued by employees is honesty. Without trust employees will not take risk, get motivated or run the gauntlet.
Recognition has more to do with being appreciated than getting credit, but too many organizations waste valuable time, energy and resources on gestures of questionable value, such as parking spaces for employees of the month or tickets for two at an upscale restaurant. A better motivator is recognition that comes in the form of assignments to join a special project, lead a study team or scope out a new system.
Of course, recognition also comes in the form of promotions and public accolades. In organizations where the emphasis is on achieving as a team, internal politics and aggressive competition are appropriately low, while crediting others with a job well done is the standard. For any number of employees, particularly in entry-level and minimum-wage positions, the psychic income of being openly and regularly appreciated goes a long way toward enhancing worker retention and commitment.
While rewards are important, they are fifth in importance with respect to the five R's. If people are paid fairly and competitively and they are informed as to how the system works, pay is a "satisfier," to quote Frederick Herzberg, but not a motivator. To provide optimum return on investment, rewards must be an integral part of an overall recognition and reward strategy—linking business goals and objectives with the other four R's.
Beginning with job profiles, rewards must be aligned to compensable factors centering on responsibility, such as "satisfying customers," "building quality products" and, as an example for managers, "increasing workforce competence." Outcomes such as these can be quantified, and managers and employees can mutually agree on goals. By identifying the right goals, attributes and competencies for your people, you can be a resource for HR because when it comes to the work and what it takes to be successful, you're the expert.
Other reward elements, such as employee stock ownership plans, 401(k)s and the like, should be clearly linked to company performance. You can help here by providing important operational and financial objectives for your area. Moreover, such dimensions as respect can be measured and compensable in terms of building self-esteem, enhancing company reputation, exemplifying company values, etc. Effective relationships can be equated to teamwork, strategic leadership (for managers), and customer relations. And both intrinsic and extrinsic rewards can then be awarded and allocated for recognition purposes.
R. Brayton Bowen is the author of Recognizing and Rewarding Employees (McGraw-Hill, 2000) and leads The Howland Group, a strategy consulting and change management firm based in Louisville, Ky. A best practice editor and contributing author to BUSINESS: The Ultimate Resource (Bloomsbury Publishing and Perseus Books, 2002), he currently serves as executive advisor for the McKendree College Center for Business Excellence. He can be reached at
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