Pay is Anti-Systemic
What Does “Pay is Anti-Systemic” Mean?
The question, “Is pay anti-systemic?”, opens a challenging dialogue. At first glance, pay seems merely a transaction—a straightforward exchange of time and effort for money. Yet, in focusing too much on individual gains and performance, traditional pay systems can disrupt a holistic sense of well-being within an organisation. This invites us to ask: Is there an alternative?
Common Pay Systems
Piece work is a pay system where workers are compensated based on the number of items produced or tasks completed, rather than the hours worked. Below are some of its advantages and disadvantages.
Pay-per-hour is a compensation model where employees are paid based on the number of hours they work. It’s one of the most traditional and widely used methods of payment in various industries. In this model, an employee’s wages are calculated by multiplying the number of hours worked by an hourly rate, which is agreed upon in advance.
Pay-for-results is a remuneration model in which employees’ compensation is directly tied to specific outcomes, achievements, or performance, rather than the number of hours they work. The criteria for such payment could vary from project completion and meeting sales targets to hitting other predefined performance indicators. In some instances, a profit-share or revenue-share scheme may be part of a pay-for-results model, where employees receive a portion of the company’s profits based on their individual or joint contribution to those profits or revenues.
Snapshot of Conventional Pay Systems: More Than Meets the Eye
| Pay System | Advantages | Disadvantages |
|---|---|---|
| Piece Work | – Speed & Productivity | – Quality Risk |
| – Direct Pay-Effort Link | – Treadmill Syndrome | |
| Hourly Pay | – Financial Predictability | – Social Loafing |
| – Encourages Thoroughness | – Clock-Watching | |
| Pay-for-Results | – Goal-Oriented | – Non-systemic |
| – High-Performance Potential | – Ethical Risks |
Unravelling the Cobra Effect: A Lesson in Unintended Consequences
Named after a well-intentioned but flawed British strategy to reduce the cobra population in colonial India, the Cobra Effect illustrates how incentives can create perverse outcomes. The British government offered a reward for every cobra skin turned in. While it initially seemed like a success as many skins were turned in, people started breeding cobras to gain more rewards. When the government caught on and cancelled the program, the breeders released their now-worthless cobras, worsening the problem.
In a corporate setting, the Cobra Effect can manifest in various ways. For example, a company aiming to reduce operational errors might incentivise employees for every error-free day. However, this could lead to the underreporting of errors or quick fixes that may cause more substantial errors in the future.
Beyond the Cobra Effect: The Pitfalls of Traditional Pay Metrics
Paying writers by the word, coders by the line of code, or testers by the bug may seem logical, but it’s akin to treating the symptoms rather than the cause—a classic case of the Cobra Effect. Likewise, hourly pay rates for these professions introduce their own set of issues. These traditional methods are not just outdated; they’re fundamentally flawed if we aim to focus on the needs of the Folks That Matter™.
Pay Isn’t a Reward; It’s Essential for Living
Too often, we think of pay as a reward for work done. But let’s shift our viewpoint: pay is a basic means for living. When we liberate employees from financial stress, their focus sharpens on what’s important—serving the Folks That Matter™.
Mintzberg’s Wisdom: A More Holistic View of Pay
Henry Mintzberg challenges us to rethink conventional wisdom around pay. According to him, pay is not a reward but an essential part of living. This reframing allows employees to bring their full attention to their work and, by extension, to the Folks That Matter™.
The Power of Self-Determination in Pay
What if employees could set their own pay and terms of employment? While this might sound radical, it brings with it a host of benefits. Employees feel more valued, empowered, adulted, and accountable. They’re more inclined to focus on serving the Folks That Matter™ rather than fretting about making ends meet, or the fairness of their wage.
Systems Over Individuals
It’s far too easy to blame individuals when things go wrong. But usually, the fault lies in the system. A pay system that allows for self-determination and leans away from outdated metrics not only benefits the employees but also better serves the Folks That Matter™.
Crafting a Self-Determined, Folks-That-Matter-Focused Pay System
- Listen to Employees: Their insights are invaluable in creating a system that addresses their needs and focuses on the Folks That Matter™.
- Transparency is Non-negotiable: Everyone should understand how the system works.
- Financial Stability: Ensure that the pay allows for a comfortable living, which in turn allows employees to focus on what’s important.
- The Intangible Extras: Beyond monetary compensation, other benefits can greatly influence employee satisfaction and focus.
- Adaptive Systems: Flexibility in the pay system is crucial for meeting evolving needs.
Wrapping Up: Pay Attention to Pay
The time has come to reevaluate how we think about pay. It’s not just a number on a cheque; it’s a complex system that impacts not just employee well-being but also their ability to serve the Folks That Matter™ effectively. Embracing self-determination in pay, informed by Mintzberg’s insights, offers a way forward for organisations looking to make meaningful change.
We may choose to operate on the basis that the purpose of any pay system extends beyond mere compensation and into the realm of attending to the needs of the Folks That Matter™. By viewing pay as a means to live and not a reward, we allow for a more holistic, effective system that benefits not just the individual, but the Folks That Matter™ as well.
Think Different