New Work Reward Systems
New, Improved, Innovative: Employee Work Rewards
In the book First, Break All the Rules: What the World’s Greatest Managers Do Differently, authors Marcus Buckingham and Curt Coffman assert that employee satisfaction is not tied to compensation as tightly as the business world has imagined. Hard though it may be to belief, several key elements reportedly have stronger influence on employee morale and engagement with their work than wages, salaries, or bonuses. During their association with the Gallup Organization, Buckingham and Coffman, concluded that the answers to the following questions will help a manager identify the key influencers of employee motivation, morale, loyalty to the company — and ultimately, staying power in a job or position:
Do I know what is expected of me at work?
Do I have the materials and equipment I need to do my work right?
At work, do I have the opportunity to do what I do best everyday?
In the last seven days, have I received recognition or praise for doing good work?
5. Does my supervisor or someone at work seem to care about me as a person?
6. Is there someone at work who encourages my development?
7. At work, do my opinions seem to count?
8. Does the mission/purpose of my company make me feel my job is important?
9. Are my co-workers committed to doing quality work?
10. Do I have a best friend at work?
11. In the last six months, has someone at work talked to me about my progress?
12. This last year, have I had the opportunity at work to learn and grow?
The Strength of All-of-a-Piece Competitive Compensation Strategy
Companies are apt to structurally and visibly package their compensation in a manner that makes it seem larger — and more beneficial to the employee — than it may be in the cold, hard light of day. For instance, Wendy’s touts a long list of employee benefits on the sandwich boards set up in front of their establishments. And Starbucks refers to its Whole Bean or Special Blend benefits package, using monikers such as a Future Roast 401(k), S.I.P., the discounted stock purchase plan, or Bean Stock, the restricted stock units. The bottom line is that many partners, as Starbucks refers to its employees, will not be able to afford to participate in equity-based rewards due to their low wages.
An equity-reward system costs a company capital or resources. As a result, the benefits of an equity-reward system may be restricted and not available to all employees. Contrarily, the key influencers of employee morale that are central to the First, Break All the Rules approach don’t have primary associated costs. And the secondary costs of, say, having a manager remember to inquire with genuine interest about how an employee’s work / day / career is going are quite small (Questions #5, #6, and #11 out of 12).
Comparative Effectiveness of Equity-based vs. Creative Reward Systems
An equity-based system of rewards generally includes one of the following arrangements: 1) Direct equity, which is the issuance of company stock or membership interests to an employee; 2) incentive stock options (ISO), or 3) deferred compensation. Each of these equity-based systems is focused on assuring continued employment of the participant — for as long as the employee-employer relationship is desired by the company — and encouraging superior performance while employed in an eligible position.
The First, Break All the Rules approach to management might, is fundamentally unrelated to a system of equity-based rewards. Inarguably, an underlying tenet of the approach is that a supervisor should manage to the strengths of the employee, capitalizing on what the employee does best to generate both synergy and a healthy return on investment (ROI) in human capital. However, the relationship is a tangential one, at best.
Warren Buffett has refused to give options to top managers and does not hold to the idea of linking equity reward systems to market price (Robbins, 2004). Buffet’s rationale is the a manager can sit on his hands, essentially doing nothing, and — given reinvestment of the company in its existing business — watch the stock prices and return on equity (ROE) rise (Robbins). The result is that the executive stock options of partners who are just taking ups space accrue worth in the millions (Robbins). Underscoring his outstanding business acumen, Buffet grants generous annual bonuses that are contingent on performance results that exceed the ROE of his companies (Robbins).
A manager that holds to the First, Break All the Rules approach will be focused on strengthening employees’ experience while they are performing their duties, knowing that more robust performance and longevity in a position will be spun from solid implementation of the model that demonstrates sufficient fidelity to the theory and authentic effort on the part of management.
Job-Embedded Innovative Benefits Strongest Draw
There is a generational aspect to the use of innovative benefits tied to specific jobs. Younger, tech-savvy workers may not value the same menu of work rewards that are appreciated by more conventionally employed workers. New employment preparation tracks have opened up and the workers taking advantage of these paths to high tech jobs have very different ideas about what they want in a work environment, and about what rewards are most likely to increase their motivation and morale. Geeks: How two lost boys rode the Internet out of Idaho, by Jon Katz, describes the path from obscurity of two talented techies in a small Iowa town to gainful employment as a techno-utopian in the big city of Chicago. Distrustful of bureaucracy, resistant to polite conversational exchanges, and wholly desirous of achieving high levels of unfettered time in digital, online environments, Katz’s geeks and those inhabiting the new settlements in Silicon Valley, are not terribly enamored with equity-based rewards. Sure, they will take stock options — and for many this has been a welcome portal to independent entrepreneurship — but they really want what the Google guys get: Paid time to work on their own inspired projects. Naturally, the free food — always within 150 feet of any worker pod — free massages in massage chairs, gym, napping rooms with snuggly egg-shaped private pods, are an encouragement, too. Here’s how one Google technical solutions engineer (Alex K.) puts it:
“The 20% time is a well-known part of our philosophy here, enabling engineers to spend one day a week working on projects that aren’t necessarily in our job descriptions. You can use the time to develop something new, or if you see something that’s broken, you can use the time to fix it. And this is how I recently worked up a new feature for Google Reader.”
Notably, Google Maps and Google AdWords were also developed under this 20% plan. But as Google has evolved and grown the range of employee types has diverged. While engineers can justify taking every Friday off to work on personal projects — not losing sight of the great revenue potential of these individual contributions — a client-facing employee can’t gracefully claim this benefit.
Tate (2012), who wrote a book on the 20% time, defends this job-embedded benefit as one that is more or less directed by the employees who benefit from it.
Google didn’t invent the idea of giving employees time to experiment with their own ideas, nor will it have the final word on how best to bestow such time. Plenty of other large tech companies have implemented their own takes on 20% time, including widely admired, innovative companies like Facebook, LinkedIn, and, reportedly, Apple…The core idea behind 20% time — that knowledge workers are most valuable when granted protected space in which to tinker — is more alive in Silicon Valley today than it ever has been before, reports of Google killing its program notwithstanding.
Google has manifested the idea of using employee suggestions to shape the company’s incentive program. Technology support and development engineers are an independent lot, unlikely to participate in a work rewards program that does not present integrated value. The key elements for integrating innovation into a traditional total rewards program, which can be derived from the Google example, is to achieve a functional balance between tradition rewards that make a company competitive in the market, and those more idiosyncratic rewards that tend to appeal only to employees in particular roles or departments in the company. What makes the blended nontraditional-traditional rewards system work is a robust program of stakeholder input, and timely responsiveness on the part of executives who have no difficulty giving less conventional practices a tryout.
Being sensitive the corporate culture is an obvious starting point, but as Tate (2012) observed, it can function as an absolute be all, end all for a manager:
“It was a suicide mission for me to introduce traditional management ideas into a company born of open source, independence and autonomy. I was an outsider with a radically different set of beliefs and experiences,.. One way to read The Year Without Pants is ‘the year of attempting culture change.’ How can an expert on management be useful in a place that doesn’t believe in management at all?”
One recommendation when establishing or refreshing a total rewards program in a company is to treat the matter like market research. It is critical to know what the stakeholders value, to keep abreast of changing needs and desires, and to continually differentiate the company’s total reward system — just as a marketer would a brand. A final point of emphasis: Only collect data that will be used. If suggestions will not be implemented, it is better not to ask for them. Preface requests for suggestions from stakeholders with the following: A need to contribute ways to re-evaluate implemented suggestions with measures that reflect the value of the changes to the workers, to the departments, and to the bottom line.
References
Buckingham, M. And Coffman, C. (1999). First, Break All the Rules: What the World’s Greatest Managers Do Differently. New York, NY: Simon & Schuster.
Burken, S. (2013). The year without pants: WordPress.com and the future of work. Hoboken, NJ: Jossey-Bass, an imprint of John Wiley & Sons, Inc.
Katz, J. (2000). Geeks: How two lost boys rode the Internet out of Idaho. New York, NY: Villard Publishing.
Robbins, S. (2004). Is equity-based compensation a good thing? In “Working Knowledge for Business Leaders.” Cambridge, MA: Harvard Business Review.
Tate, R. (2012). The 20% doctrine: How tinkering, goofing off, and breaking the rules at work drive success in business. New York, NY: Harper Business.
____ (2012). Your special blend: Rewarding our partners. Seattle, WA: Starbucks Coffee Company. SJB11-18786 http://www.starbucks.com/assets/7343fbbdc87845ff9a000ee009707893.pdf
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