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Pay Motivates?

Philip Ziman, VP Total Rewards, Bazaarvoice

Human Resources professions struggle to become true partners to the businesses they support. The cause is that they often  blindly implement “best practices” and kowtows to management whims without the business acumen to advice management. HR often relies on simple  rules of thumb about what employees want instead of understanding the unique needs of the workforce and the business implications of their decisions. As is often the case, the void of information is filled with generalizations,  assumptions and myths. The following ten common myths about reward programs are easily debunked.

Reward Program Myths

Forced ranking motivates employees

There are fundamental flaws with this practice of selecting a fixed percentage of the organization to slot into the lowest  performance bracket. These  flaws include an assumption that there is a large group of underperforming employees for whom management has neglected to address their poor performance. Additionally, it’s a misconception that by informing employees  that they are in the lowest bracket, those employees will be spontaneously motivated to perform better.

Managers motivate employees

Did it feel better to see that gold star on your elementary school assignment that you worked so hard on or show it to your   other when you got home? Or, more precisely were you intrinsically motivated by your hard work or extrinsically by your   mother’s approval? As Daniel Pink suggests the enlightened knowledge industry workforce is motivated by the mastery of our  professional pursuits or intrinsic motivation. Management should be careful not to impede employee performance by spending  their time sprinkling affirmations instead of staying out of their way.

Pay motivates

Employees are more likely to recall the percentage of their last increase rather than the absolute amount of pay they receive on annual basis. Once a certain comfortable income level is achieved, employees focus on the intrinsic reward of the job.  This is  evidenced by the fact that companies like Google, who are full of people who are wealthy beyond their wildest  dreams, continue to go to work.  Management is smarter than employeesHave you noticed on reality TV shows that as soon as one person thinks they are in control, they are summarily voted off? Those who are not humbled by the honor of leading others  are doomed by the wisdom of the masses. Employees either think that they individually or truly as a group can make better  decisions than a single isolated manager.

You only hire top talent

Many technology companies contend that they hire the “smartest” people. When you think about it, this really is a silly claim that the employees at one company have a higher intelligence quotient than another. A successful hire is as much about finding the right fit of competencies and culture as it is about the claim of above average intelligence.

Savings plan retain employees

Savings plan as well as other employee benefits fill out a basic slate of standard offerings. Companies need to meet a basic  competitive offering to appear as if they are a “good” employer. The value and significance of these plans vary greatly based on the individual employee’s situation. HR should be careful not to oversell the importance.

Long term stock appreciation builds wealth

Very long-term stock appreciation builds wealth. However, there have been several periods, such as the late 1980s and around  2009, where a highly volatile stock market made it difficult for  medium-term investors to see positive returns. Human  Resources, who are egged on by savings plan investment companies, should be careful to give employees credible advice.

Employees value health benefits

Like savings plan, most employee benefits are not a differentiator, and rather a minimum threshold in the employment value  proposition. Young employees do not expect to use their health benefits in the foreseeable future. They do however value  knowing that they had choice about the kinds of coverage offered and confidence that they’ve made the right decision. Perks motivate employees Three meals a day, on-site discounted gas station, and unlimited vacation are provocative and  stimulating conversation points in the recruiting  process. However, employees reallyshouldn’t be swayed by perks when  deciding to change jobs. Moreover,  perks are not a reason to work harder, perks provided to the broad employee base quickly  become entitlements. Moreover, an advertent or planned removal simply becomes a potential demotivator. Perks like named  parking spaces, lead to resentment and elitism instead of motivation for advancement.

Compensation is fair

While the employment markets and HR compensation practices create a very strong central tendency in pay at all levels,  anomalies exist for a variety of situations. The Google software engineer is just as good as the engineer at the next soon to be successful startup, but their actual earnings are completely different. The only way to have the perception of fairness  is to be transparent about the process for decision making.

Compensation is less of a motivator than a potential demotivator. Impulsive decisions regarding compensation programs lead to  poorly communicated, inconsistently managed and ineffective rewards. The result is that what appears to be rational and  beneficial is subverted by inauthentic double speak. Especially for millennials who have become jaded by media and the  debunking of many “truths” about our work lives. The lesson to be drawn from these is, to not become too excited or over  rotate on any one form of compensation or rewards program. Provide the fundamental structure, and then arm management with the tools and resources to have authentic interactions with their employees.



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