How should people be paid?

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Research and 9 questions about how people should be paid?

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  • Interesting how different approaches can be ... however they are strongly dependend on industry and culture (e.g. company/country)
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  • Hi Patrick, Thanks for your valuable comments. Very interesting thoughts. I agree with you that people are different. In this blog posting http://blogs.wsj.com/management/2009/03/24/the-facebook-generation-vs-the-fortune-500/ Gary Hamel brings forward 12 important points to reflect on for all of us. Each one of the 12 points deserves, I think, to be reflected and acted upon. They represent, I think, a wake-up call for a number of managers and employees working for companies in different industries. Mr. Hamel writes, for example, at # 11 that 'it’s obvious that human beings will give generously of themselves when they’re given the chance to contribute to something they actually care about.' I think it's great that many people are very happy to share information on, for example, Twitter, Facebook, blogs, XING, slideshare, and other Web 2.0 tools.
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  • Hi Frank,

    Nicely done! You are raising some important issues in your presentation. For me the big issues with performance based pay are: 1. money is not an incentive for everbody and everything. Companies should think hard, if monetary incentive system really bring out the character traits they are looking for or rather the opposite. 2. In the 21st century complexity is the norm, markets and business environments are highly dynamic. How to you set clear and unambilavent goals in a time like this? I'm not suggesting that it's not possible but it's very hard and it takes a real effort.
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How should people be paid?

  1. 1. How should people be paid?
  2. 2. Question # 1 Should information about what people are paid be shared openly?
  3. 3. http://qz.com/209685/abramson/ An increasing number of companies are releasing all salary information to the public.
  4. 4. At Menlo Innovations, everyone can see what everyone else is getting paid http://nymag.com/news/features/bossless-jobs-2013-6/index1.html
  5. 5. At Whole Foods, everyone knows what everyone else earns. http://online.wsj.com/article/SB10001424127887324235104578243673073627726.html
  6. 6. http://www.youtube.com/watch?v=gJkOPxJCN1w People working for Semco have access to information about the company’s revenues and costs – including wages of everyone who works for the company.
  7. 7. Whether a person is satisfied with his or her relative value mainly depends on how his or her compensation compares with the compensation of his or her peers. http://www.managementexchange.com/hack/simply-practical-model-compensation-management
  8. 8. Question # 2 Who should decide how much people are paid?
  9. 9. At Gore, people are asked to indicate who’s making the biggest contribution to Gore’s success. No specific criteria are provided. An associate typically is evaluated by 20-30 peers and will evaluate 20-30 peers. http://www.mixprize.org/story/innovation-democracy-wl-gores-original-management-model
  10. 10. The energy company AES has tested a system that sets salaries through peer review. In the experiment, each person sent a proposed salary for himself or herself to everyone else in the group. Malone, Thomas W.: The Future of Work, p. 67.
  11. 11. A possibility is to let each person in a group assign a percentage of the total compensation budget to all the others. The average of these numbers then determines each person’s actual compensation. Malone, Thomas W.: The Future of Work, p. 67.
  12. 12. Question # 3 Should people be paid per task done?
  13. 13. At the company Fishbowl, colleagues are paid on commission for doing tasks: They can, for example, ask each other: ”I have an extra half hour. Is there anything I can do to help you finish a sale?” https://hbr.org/2013/03/why-we-pay-all-our-employees-a
  14. 14. Harvard University Professor Roland Fryer, Jr. has conducted large-scale studies paying students for reading, grades, various behaviors, and test scores. The results indicated positive outcomes, especially for paying students to learn specific skills. http://www.psychologytoday.com/blog/who-we-are/201005/motivating-students-learn
  15. 15. Question # 4 Should people be paid an individual bonus?
  16. 16. There is no correlation between CEO pay and company performance http://www.businessweek.com/articles/2014-07-22/for-ceos-correlation-between-pay-and-stock-performance-is-pretty-random
  17. 17. Financial incentives may reduce an person’s natural inclination to complete a task and derive pleasure from doing so. Analysis by Bernd Irlenbusch of 51 separate studies. http://timesmediamw.com/more-pay-equals-less-work/
  18. 18. http://www.faz.net/artikel/C31151/bmw-personalvorstand-unsere-leute-brauchen-keine-karotte-30029080.html Wenn man die Boni zur Motivation braucht, fördert das eine schädliche Entwicklung für das Unternehmen. Harald Krüger BMW
  19. 19. When I taught 7th grade English, I frequently gave stickers to my students. One day I ran out, and informed my students that there will be no stickers for a few days. A riot ensued. ”Where's my sticker?” ”I want a sticker!” ”I won't do anything without a sticker!” I discovered they had become addicted to stickers. http://www.edutopia.org/blog/reward-fraud-richard-curwin
  20. 20. Studies by Edward Deci show that strategies that focus primarily on the use of extrinsic rewards do, indeed, run a serious risk of diminishing rather than promoting intrinsic motivation. http://www.rug.nl/gmw/psychology/research/onderzoek_summerschool/firststep/content/papers/4.4.pdf http://blogs.hbr.org/cs/2013/04/does_money_really_affect_motiv.html
  21. 21. Several studies show that there is less than 2% overlap between pay and job satisfaction levels. In other words, you cannot buy engagement with money. https://hbr.org/2013/04/does-money-really-affect-motiv http://www.timothy-judge.com/Judge,%20Piccolo,%20Podsakoff,%20et%20al.%20(JVB%202010).pdf
  22. 22. External rewards work well for routine, mechanical tasks, such as those found on a 20th century assembly line. Analysis by Bernd Irlenbusch of 51 separate studies. http://timesmediamw.com/more-pay-equals-less-work/
  23. 23. Further inspiration https://www.teacherspayteachers.com/Product/How-do-you-motivate-yourself-1378486
  24. 24. Question # 5 Should peple be paid an individual bonus that must be given to others?
  25. 25. National Australia Bank gave money to people working for different companies and asked them to give gifts to each other. Teams that received pro-social bonuses performed better after receiving the bonuses than teams that received money to spend on themselves. http://blogs.hbr.org/2013/10/the-bonus-employees-really-want-even-if-they-dont-know-it-yet/
  26. 26. Question # 6 Should all managers be paid the same salary?
  27. 27. In Santiago, Chile, drivers, who are compensated with a fixed wage have approximately 67% less accidents per kilometer driven than drivers who are paid per passenger transported. http://www.nber.org/papers/w11744
  28. 28. At Whole Foods, the top 7 executives get the same pay and bonus. http://online.wsj.com/article/SB10001424127887324235104578243673073627726.html
  29. 29. In the USA, emotional well-being levels increase with salary levels up to a salary of USD 75,000. Afterwards, they plateau. http://www.pnas.org/content/early/2010/08/27/1011492107.abstract http://blogs.hbr.org/cs/2013/04/does_money_really_affect_motiv.html
  30. 30. Question # 7 Is paying people to be creative a good idea?
  31. 31. Edward Deci has found that money does not work very well to motivate people over the long term, particularly for tasks that involve creativity. http://www.time.com/time/nation/article/0,8599,1978589-2,00.html#ixzz0krFBzRx8
  32. 32. http://bigthink.com/garyhamel/the-problem-with-employees Initiative, creativity, and passion, that create wealth in the creative economy, cannot be commanded
  33. 33. Question # 8 How are people praised for results in non- financial ways?
  34. 34. For a player - for any human being - there is nothing better than hearing “Well done.” http://hbr.org/2013/10/fergusons-formula/ar/4 Sir Alex Ferguson
  35. 35. Thank you. Great job. I really appreciated your work on that project. These words take less than 10 seconds to say. http://www.forbes.com/sites/victorlipman/2013/02/09/in-praise-of-praise/
  36. 36. Non-financial incentives are more effective than financial incentives http://www.mckinsey.com/insights/organization/motivating_people_getting_beyond_money
  37. 37. People reported that recognition of their ideas was a reward in itself. They wanted to be engaged and to participate. We therefore involved people in presenting their ideas to senior management. http://sloanreview.mit.edu/the-magazine/2011-winter/52210/the-5-myths-of-innovation/
  38. 38. At your next department meeting, see if you can find someone to praise for:  Coming up with some great ideas.  Trying something new.  Challenging the conventional way of thinking.  Bringing an external idea into the company.  Collaborating with a different department.  Making something happen. http://www.bqf.org.uk/innovation/2010/04/06/praise-the-behaviours-you-want-to-see/ Paul Sloane
  39. 39. Indra Nooyi, CEO of PepsiCo, sends the spouses of her top team handwritten thank-you letters. http://www.mckinsey.com/insights/organization/increasing_the_meaning_quotient_of_work
  40. 40. http://www.psfk.com/2013/11/notes-for-anyone-billboards.html
  41. 41. Further inspiration https://www.teacherspayteachers.com/Product/How-do-we-give-feedback-1761017
  42. 42. Question # 9 How are people praised for effort in non- financial ways?
  43. 43. Study shows that it is much better to praise a child for effort than for their intelligence. http://www.nytimes.com/1998/07/14/science/praise-children-for-effort-not-intelligence-study-says.html
  44. 44. Praising students for what they did and did well is a good motivator http://youtu.be/RzkwtIMPkrs Minute 36.
  45. 45. http://www.youtube.com/watch?v=HhxcFGuKOys minute 9.
  46. 46. Writing handwritten notes may seem like a waste of time. But in my experience, they build goodwill and lead to higher productivity. Sources http://youtu.be/9buGE_vKxcc https://hbr.org/2011/02/secrets-of-positive-feedback Douglas R. Conant
  47. 47. Further sources of inspiration https://www.alumni.hbs.edu/stories/Pages/story-bulletin.aspx?num=4992&sf43327163=1 https://hbr.org/video/4093719303001/change-the-way-you-pay-your-sales-force http://blogs.hbr.org/2014/06/dont-offer-employees-big-rewards-for-innovation/ http://blogs.hbr.org/cs/2012/09/how_to_find_out_what_customers_will_pay.html http://blogs.hbr.org/cs/2010/01/is_your_business_model_a_myste_1.html http://blogs.hbr.org/2013/11/when-selling-digital-content-let-the-customer-set-the-price/ http://blogs.hbr.org/cs/2013/02/why_good_better_best_prices_are_so_effective.html http://www.happinessresearchinstitute.com/download/i/mark_dl/u/4012080374/4605335061/TheH appyDanes%20%28Webedition%29.pdf https://hbr.org/video/4093719303001/change-the-way-you-pay-your-sales-force https://hbr.org/2014/10/capture-more-value/ar/1 http://www.innosight.com/images/BMI%20Chart%20063008.pdf http://rcs.seerinteractive.com/money/ http://www.resultsfromcrowds.com/wp-content/uploads/2011/12/Crowd_Business_Models.pdf http://youtu.be/1ju8-agpCAQ http://www.zeit.de/2008/21/III-Kunst_-Interview-Anderson?page=2
  48. 48. Thank you for your interest. For further inspiration and personalized services, feel welcome to visit http://frankcalberg.com/ Have a great day.

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