The conventional compensation system is used to reward, control and nurture individuals based on class or performance. The way we think about reward systems needs to shift away from “a means to control behavior” to “a means to serve the marketplace.”
A pay system that is aligned with stewardship practices will not feed dominance, will not deliver punishment and will not create isolation. A stewardship-aligned pay system will represent an organization’s dedication to service. But there are five reasons why the conventional compensation system does not help organizations accomplish this. In this article, Peter elaborates on the five reasons performance cannot be purchased.
Article by Peter Block:
A compensation system is like a bumpy marriage. Not perfect, but we fear that if we get out of it and look for something better, we might end up worse off than before. So it is with the sacred ground of how we pay people. We are all uneasy with the reward systems most of us live under, but don’t know what else to do. The problem is how we think about them, for the conventional wisdom is incongruent with creating a stewardship-guided organization.
Reason #1: The Class System
Our compensation practices reinforce the belief in separating the managing from the doing of the work. Often there is one pay system for executives, the intent of which is to pay them as much as possible. There are other pay systems for managers and core workers, the intent being to keep labor costs as low as possible. Stewardship reintegrates the managing and the doing of the work and has all levels working under similar rules.
Reason #2: Pay and Performance
Our pay practices are based on the idea that you can buy behavior, even though there is no consistent evidence that the more you pay people, the greater their motivation or performance. The belief that behavior can be purchased is the ultimate act of sovereignty. Stewardship has pay be a question of common purpose and accountability for the success of the enterprise.
Reason #3: The Best and the Brightest
Our pay systems are aimed at rewarding individual behavior. We are preoccupied with nurturing the top 10 percent of our workforce, rather than fostering interdependence, teams, and community. Paying primarily for individual effort is rewarding self-interest. Stewardship pays primarily for team, departmental, and organizational outcomes.
Reason #4: We Own You
We reflect our longstanding love affair with leadership through our pay practices in two ways. First, we base pay grades on the size of a person’s empire: budget responsibility, direct reports, breadth of responsibility. Second, we equate performance with supervisory evaluations: you are a good performer if your supervisor gives you a high rating. These both act as the glue in a command-and-compliance form of governance. Stewardship means that everyone gets paid for outcomes of concrete value to the organization.
Reason #5: Private and Confidential
We maintain secrecy about how the pay system works. We rarely know what and how other people are paid, especially those at higher levels. Pay systems based on stewardship principles are transparent so that all can see that the success of the organization is a community creation and rewarded accordingly.
So, here is the point.
What we must confront in our current thinking about compensation is that we treat pay more as a means to control behavior than as a means of building an organization that serves its marketplace. Stewardship leads to compensation systems that do not feed dominance and submission, do not deliver punishment and blessing, and do not create isolation and distrust. They know that compensation is not as important as we think. It is just the easiest thing to talk about. What does matter is whether people are doing work that matters, whether they have some control over how that work is done, and whether they feel connected to the people around them. It these are not at the center of our thinking, then we resort to “compensate” for the lack of these by making too big a deal of the money. Which for most people, is not that much anyway.
If these ideas resonate with you, or if you want learn more practical strategies on how to implement Peter’s ideas, consider attending one of our Flawless Consulting Workshops.