Democratization of Wealth

In the last issue, Peter wrote generally about the alternative to pay systems that are incongruent with creating a stewardship-guided organization. In this piece he gives practical examples.

Partnership and empowerment cannot be built or maintained by separating the managing and the doing of the work. Stewardship distributes wealth at every level of the organization. It believes in paying people as much as possible rather than as little as possible. These ideas argue for a common pay system for all levels of the organization. High levels will still have higher earnings, but each level works under the same system that

  • connects earnings to real outcomes of a unit or larger divisions;
  • pays higher-percentage bonuses if the money is there;
  • offers tax advantages or special earnings possibilities;
  • has the objective of paying as much as possible;
  • provides a soft landing in case of termination, acquisition, or contraction; and
  • offers some equity in the institution.

Here are some of the easier steps to take.

Gainsharing

Gainsharing has individuals and teams benefit directly from economic improvements they deliver. For example, a company pays a team 25 percent of every actual real saved over and above a budgeted set of goals. Real reais means that the costs of achieving the savings must be deducted from the savings before the team gets its 25 percent. Fair enough—that is how the marketplace works.

Pay for Skills

A pay for skills system has salary increases or a higher hourly wages based on how many different tasks or jobs someone can do in a unit. Valuable concept: the more jobs people can do and the more of the organization they understand, the more valuable they are. Pay for skills is a worthwhile step to take, but if it does not shift the mind-set about individual pay or the belief that you can buy behavior, it will not create equity or partnership at the lower levels.

Stock Options and Ownership

Stock options represent the purest relationship between individual wealth and that aspect of organizational performance measured by stock price. A stock option means you are given a guaranteed purchase price for a share of stock. You are then given a period of time, say five years, to exercise the option. If the price of the stock goes up, you can sell it at that higher price and make money. It is a fail-safe opportunity to benefit from improved performance.
Stock options have traditionally been reserved for the management class ––which is an expression of our faith in patriarchy, our belief that those at the top are most critical in creating the wealth. A belief in partnership extends to people at each level the opportunity of receiving earnings from the growth of the company’s stock price.
But stock ownership alone does not change the fundamentals of governance, and too often employees may own stock, but not own much more of what makes the business function. At worst, employee stock ownership sustains the illusion of partnership with no substance; at best, it underscores the organization’s intent to treat employees as owners in a thousand other ways.

End Secrecy

Finally, stewardship means that all employees know how pay works at different levels of the organization. Secrecy about pay systems is a sure sign that there are inequities that cannot be justified, perhaps even to those who benefit from them. Public and nonprofit agencies live with a fresh-air policy about pay. If you work for the Parks and Recreation Department of the city of Boston, you know how much money everyone makes, including the commissioner. This doesn’t mean their pay system is perfect, but they pass the secrecy test. Democratizing wealth, or everybody living under a common pay system, is what creates real accountability, creates real trust, and creates a sense of ownership that most current pay systems undermine.

Adapted from Stewardship: Choosing Service over Self-Interest, 2d ed. (San Francisco: Berrett-Kohler, 2013).

No Comments Yet.

Leave a comment