By Peter Block
Everyone likes the idea of aligning performance evaluation and pay systems with positive culture and real performance outcomes, but most of us have rarely experienced it. The methods we commonly use to judge performance and structure compensation have little to do with real contributions to the organization’s success or affirming the kind of culture we want to create.
Take the “Hay system,” a traditional method of using job descriptions—including the number of direct reports, type of budget responsibility, and levels of responsibility and decision-making authority—to make rational the different pay levels within an organization. This system has done an elegant and durable job, but we must question exactly what we have asked it to do: pay people based on the size of their territory, number of subordinates, budget size, level of authority.
Soften it if you like, but these are measures of empire, not contributions to the organization. The effect is to value and reward territorial expansion and to keep the lines between the silos clean and separate. Today, we call for teamwork. We have renewed interest in cross-functional dialogue; we ask people to act in the best interest of the whole organization. Yet, when we put money on the line, as in the Hay-type pay system, it is the large, powerful, clearly defined department or territory that is valued above all else.
Consider also how we most often get paid on the basis of how our boss evaluates us. This would more accurately be called “pay for compliance.” One human being’s evaluation of another is fundamentally subjective. We try to overcome subjectivity by using numbers to rate each other. We try to be unbiased in what we look at and pick hard-nosed business objectives to evaluate. Still, it is very difficult to directly attribute real organizational outcomes to the actions of a single individual. Even when we think we can measure something like the dollar volume produced by a salesperson, we can appreciate that sales productivity is a complicated equation. Salespeople are so dependent on their service unit, on the product getting to the customer on time, on having the right product to sell, and especially on the quality of their territory that any assessment attributing one sale to one person describes only a partial reality.
The solution is to stop using job descriptions and boss evaluations in our reward systems. Create evaluation and pay systems at every level that are tied to real organizational outcomes, not supervisory perceptions or measures of empire. Pay for the product created and sold, the service delivered, the customer satisfied and returning––in essence, on how the business or unit as a whole performed, which means we honor the reality that we each ride on the success of the whole.
What we have now are pay systems based on a parent-child model rather than a partnership model. We cannot create a culture of ownership and responsibility with systems that promote better parenting and ride on the belief that money motivates. We need a reward system that gives preference to service over self-interest, one that values interdependence and accountability for the success of the enterprise. This is what helps to institutionalize stewardship.
Adapted from Stewardship: Choosing Service over Self-Interest, 2d ed. (San Francisco: Berrett-Kohler, 2013). In the last 25 years, Peter Block’s Designed Learning has trained over 1,000,000 staff professionals worldwide using his highly successful Flawless Consulting™ workshops. To find out how you can bring this valuable training to your company or organization, please contact Bill Brewer, Director Client Relations at: 1-866-770-2227-US/513-524-2227. Or email us at: firstname.lastname@example.org. You can also request information online.