Author: Fabiola Eyholzer
Compensation and bonuses are still used as predominant way to incentivize and recognize people. However, Lean | Agile Enterprises avoid individual cash incentives that are so toxic for their teams and instead move to more meaningful ways of reward and appreciation, that acknowledge the fact that people are driven by mastery, autonomy, and purpose. They also bring more flexibility and transparency to their Reward solutions and invest in the health and wellbeing of their people.
The industrial era belief that money is the strongest (and only effective) motivator for employees is firmly rooted in many organizations. Unsurprisingly, compensation and cash bonuses are still used as predominant way to incentivize and recognize people – an expensive yet ineffective tool.
Ever since Daniel Pink’s “Drive” (and decades of scientific studies) it is clear: Agile people are driven by mastery, autonomy, and purpose. Meaningful reward and appreciation for them comes in forms of pride in achievement, social contacts, interesting work, new challenges, growth opportunities, and self-fulfillment.
The way to take the topic of money off the table is by paying employees fairly and competitively, but then doing whatever it takes to get them to forget about pay. This includes having open and honest communication about pay, and matching compensation with adequate non-monetary reward and recognition.
Here are some guidelines to help rethink a total compensation approach:
- Pay adequate base salaries: Roles in agile teams are based on generic value statements rather than specific individual job descriptions. Any job is, consequently, less stringent, and – instead – requires a high degree of flexibility as well as an ability to activate and apply relevant expertise. Adequate base salaries, therefore, compensate not only the role, but the person’s skills and experiences.
- Decentralize salary decisions: Compensation has to be easy to deliver – and change. This means empowering managers to set salaries and pay increases. These adjustments must be decoupled from an annual process to allow for a more flexible schedule. Leaders are guided in their decision by peer reviews, transparency, as well as adequate data and expert advice, provided by a specialized compensation team.
- Bring transparency to the salary structure: A transparent salary structure brings many advantages like fostering greater trust and honoring the value of employees, regardless their personal negotiation and lobbying skills. However, any company needs to evaluate (and test) carefully what degree of transparency is feasible in their environment.
- Avoid toxic individual bonuses: Management-by-Objectives (MBO)-based individual and team bonuses are toxic for an organization that thrives on collaboration and responsiveness; and should be eliminated entirely. However, fair, transparent incentives that honor collective performance and corporate success (for example, equity and profit sharing plans), allow employees to participate financially in the achievements of the enterprise. Avoid incentives that might provide an undesired motivation for people to stay or interfere with the company’s need to move an employee out quickly.
- Combine various forms of recognition: Impactful appreciation must be aligned to corporate values. Each enterprise must find a suitable combination of low frequency formal, recognition with more frequent and intimate, personal acknowledgements. Once set, the power of recognition is put into everyone’s hand.
- Provide benefits that people value: Benefits are more than pension plans and healthcare: they are about making the lives of people easier and better. Flexible schedules, remote office, parental leave, financial guidance, time off, and unlimited vacation time are examples of tangible benefits that help people to be worry-free so they can find their optimal flow and work life blending.
- Invest in the health and wellbeing of people: Companies face unnecessary “waste” in form of stress, anxiety, burnouts, and chronic health issues. Investments in the wellbeing of employees is not only the right thing to do, but translates directly into revenue.
A balanced compensation approach is part of “taking the topic of money off the table”. It promotes a broader understanding of an effective incentive system – one that appreciates the appeal of growth opportunities.
This article is part of the series “Aligning key Themes in Human Resources to Lean | Agile Values & Principles”
This post was contributed by Fabiola Eyholzer, CEO of Just Leading Solutions, LLC. More information about Fabiola, Agile HR and the services of Just Leading Solutions can be found at www.justleadingsolutions.com.