A Note: this post was written by a guest writer, and does not necessarily represent my opinion. That said, I think it’s important to host a variety of thoughts and perspectives on the blog and thus, I give you the following article written by Lavinia Weissman, Publisher of WorkEcology.com. As always, please feel free to comment.
The Equity Factor:
Pay for Performance – From Wage Earner to Portfolio Worker
If you are a thought or practice leader working with others to increase work effectiveness, introducing a Pay-for-Performance (PFP) System is one of the most productive methodologies a company can integrate with a high performance change initiative. There are different factors to consider when implementing PFP in large, mid-size and small companies. Some of these performance measures relate to size, culture, values proposition and level of system impact and others relate more to the relationship between the person’s position within a company or where they focus their activity within their Social Network and the position of the company they work for in their Value Network and/or value network clusters.
In large corporate systems, a company’s income, expense and ROI can be so complex, it is easy for managers to get lost in gaining agreement on measures, performance standards, quantifying types of equity, base pay and bonuses in such away that the goal to standardize, becomes an obstacle for smaller autonomous units and groups of people to define PFP measures. A Social Network Analysis and a Value Network (& Clusters) Analysis are valuable tools for organizing work-effectiveness strategies for individuals within their groups.
Social Network and Value Network Analysis are tools by which economic decision makers can learn how a person or group is valued by their network and how this performance can translate to return on investment to the organization which employs these people and the groups they belong to within that organization. This is also a way to monitor bottom line contribution for triple bottom line factors that are societal and contribute world benefit.
These type of performance measures can be difficult for decision makers to evaluate since the competencies and skills exercised are often far out of the realm of expertise that managers understand on a day to day basis. This is often the type of performance that is hard for people without expertise to measure and reward competently because the process by which people learn to value this kind of performance implies building trust by sharing knowledge and experience that translates into organizational learning.
Many executives shy away from the investment in organizational learning because they view it time intensive. Others find that the time involved if practiced with thought, can break a mechanical pattern the way a company and its personal operate where the cost become lost business and low morale. Some find that while the change to becoming a learning organization seems time intensive, it actually leads to greater efficiency, motivates people into contributing greater productivity.
Employees then feel part of a value chain of learning and begin to relate differently; decision makers find themselves charting a course with clearer direction whereby others make the decisions they have to autonomy to act on with out executive leadership intervention. By leading this way, a core group of decision makers can break a dysfunctional pattern and bring more life into a company whereby people simply feel more control over their own work and hence their own life.
In small to midsize businesses or small autonomous business units within Fortune 2000 companies lead their own performance in relationship to activities they participate in outside their groups. Often the expert worker within a smaller group relies on building relationships and capability with people of similar expertise outside in their field or within a client setting. In some instances, these workers learn with peers who work for competitors through professional associations or joint research ventures.
Within the company, the demand on the worker is so great, the perceived investment of giving these knowledge workers the freedom to relate, learn and share knowledge in a larger social network outside the company may not be easily recognized by company founders and may not be viewed by some as relevant to performance on the job. Leaders, who encourage this kind of performance, learn to exercise capacity to building trust and learn how to foster outcomes without concern for knowing day to day detail of how these outcomes were achieved.
All this activity builds brand and reputation for the company and individual employees. Value derived from this kind of activity depends on how these expert workers return the knowledge and learning they achieve on the job. This type of learning becomes mission critical, whereby these workers translate their learning into innovative practices, intellectual property and products.
The worker then gains an asset to add to his/her portfolio of accomplishment that gains a public audience, reputation and capability outside the worker’s place of employment. This accomplishment is something can be recorded on a resume or added to a web based profile/career portfolio. Within the culture of PFP, this talented individual can then gain variable rewards along with the company and shareholders; the company then lowers its risk of having this person leave to have this person’s capability turn to value for another company.
While the philosophy of PFP can be inspired by one person or recorded into a corporate strategy, PFP does not integrate as a work effectiveness practice unless performance can be quantified for individuals within a workgroup and everyone within that work group shares a mutual understanding of what that performance means. As a result, the PFP system design grows out of the process of learning; people within the work group, who perform the work, are identified and rewarded out of a generative dialogue where critique of performance is integrated into the work effectiveness review and assets/equity gained by a company and its workers are identified as part of this review.
When a worker manages his income and assets by acquiring a variety of equities, a worker can stabilize income and asset generation through variable income on top of a moderate base salary. The variable income can then be invested in fungible financial equity whereby income can be earned without direct labor and more personal assets can be accrued. Given today, most workers like their jobs and feel more challenged by economic uncertainty tied to the cost of gas, a PFP may provide opportunity for workers to feel more control financially.
Portfolio Workers, who manage their income with this approach can build protection for layoffs, resources for life long learning and funds to manage health care treatments, therapies, and time off from work for life transitions. The PFP system provides a side benefit that cannot be gained as easily from a traditional wage system based on hourly and salary job classification and an annual holiday bonus system.
These equity forms are described in Art Kleiner’s book, WHO REALLY MATTERS, The Core Group Theory of Power, Priveliege, and Success. Thinking and attitudes in regard to some of these equity forms was described in recent articles about recently reports CEO compensation in these stories:
- Capability, relationship and reputation equities: Raytheon’s board penalized Wm. H. Swanson, CEO lost $1M in
compenstation for not giving credit to other people in his report on company success. (read more here) - Fungible financial (personal investing), rainmaking (raising money), relationship and reputation equities: Aetna’s CEO, Rod Williams bought $1M in company stock days after the company lost 20% of its value. Williams did this as a gesture to give amessage of his continued faith in the company. (read more here)
For some small to mid size companies, this is old news. A high performance founder or chief-leader recognizes that managing performance involves defining success factors, which build personal equity and investing in other people to do the same. Deploying a Pay for Performance Systems is critical to leading this type of high performance culture which employs Portfolio Workers, who take initiative and exercise the emotional intelligence of life long learners.
A recent Boston Globe article suggests that the United States is now in the era of dual (rich/poor) or multiple economies where pockets of growth, stability or decline exist simultaneously. Portfolio Work and Pay for Performance may bring us to an era of sustainability, where income methodologies are become a form of protection instead of something you have or you don’t. This kind of methodology can permit the workforce to feel more control over their personal finances and ability to manage their personal assets and equity.
———–
Lavinia Weissman is the publisher of WorkEcology.com. WorkEcology is a gateway to other companies and individuals dedicated to learning how to work well to live well. Drawing from a background in health care systems, Lavinia has worked as a program and clinical manager defining organizational and individual performance measures. As a leadership
coach and consultant, Lavinia has worked with people of diverse cultural and expert background in numerous industries and sectors. As part of her practice, Lavinia provides editorial consultation to partners and clients on the design of web based content complimentary to culture and change initiatives that adopt a PFP system and use of SuccessFactors software.
To learn more about Portfolio Work, write Lavinia at coregroup@workecology.com or to obtain a power point presentation and for articles on this topic follow this link. To read more on the Pay for Performance Culture, click here.
