LEADING THOUGHTS

Let’s pump up employees and stoke their competitive juices by ranking them against their peers. Better yet, let’s throw cold water on them. Comparing workers to their peers is usually a lousy idea, and here’s why. Go to article

The organization is flying through the turbulence of change. What does it do? Throw gobs of money at senior execs and “star” performers to induce them to stay on board? There is a more shrewd and less costly solution. Go to article (requires registration)

The issue: When selecting a new leadership team, should CEOs use a scientific approach that is fact-based and analytical? Or should they emphasize subjective factors such as personality, loyalty, motivation, politics, and team chemistry? Let the debate begin. Go to article

In the UK, for example, there’s a proposal to tie top public sector pay to a 20-times multiple of low pay, and to publish the salaries of the highest earners.

Amid all the huffing and puffing, the huge UK-based HR association, CIPD, is providing a gutsy contrarian view. In a recent report, CIPD argues in favour of variable pay and bonuses, a tough argument to make in these days of retrenchment.

“Politicians and, perhaps more importantly, more strident parts of the media need to stop seeing pay in the public sector as only a cost to be driven down,” the report says. “Instead, used well, it can be a tool to drive up standards and increase value to the taxpayer.”

So how should compensation be designed to deliver what public sector bosses and their political masters intend? CIPD suggests that, for the most part, what works for the private sector should work for the public. To wit:

Ensure reward practices match the purpose.
The key question is: “Are the ways that the benefit package is structured likely to make any day-to-day difference to the ability of the organisation to deliver its objectives, or the effort delivered by individuals to help it do so?”

Make compensation transparent.
Employees need to know what is expected of them and what they need to do to earn a pay raise or bonus, and what is expected of others. Transparency also builds credibility with taxpayers. In fact, CIPD likes the idea of publishing the names of high earners, not merely their job titles. U.S. states such as Utah, Washington, Nebraska, and California already have publicly accessible online databases containing the salaries of state employees.

Reward performance.
This won’t please the “slash the pay packet” crowd but CIPD suggests public sector managers make greater use of variable pay to reward individual or team behaviour. This is a good way to recognize high performance without continually ratcheting up comp levels and pension commitments. “Bonuses can help focus minds by communicating what’s important to the organisation and can be more cost-effective than consolidated pay awards.”

Adopt flexible compensation schemes.
CIPD recommends moving from national pay agreements, “pay spines/increments”, and service-related pay progression to flexible pay structures. More flexible pay grades and progression mechanisms should be adopted to allow individuals to progress through their grades faster.

Download Transforming Public Sector Pay and Pensions

You’re flush with excitement because you’ve just hired an industry high flier. How can you make sure that your new star employee isn’t a flash in the pan?

Top-notch talents do not automatically perform at high levels, say Groysberg (Harvard Business School), Lee (RiskMetrics Group), and Abrahams (Harvard Business School). Writing in the MIT Sloan Management Review, they offer advice on how to get the best out of the best.

Their main point is that “star” hires perform at their peak when surrounded by colleagues of similar talent. As proof, they point to a study they performed among equity analysts who benefited (as did their customers) by working with sharp portfolio strategists and salespeople.

Why is this so? It turns out that high-quality colleagues act as sources of information, provide insightful feedback, serve as valuable interfaces between knowledge workers and clients, and enhance the reputation of their star colleagues.

This management strategy also leads to higher retention of the top performers, the authors state. “The goal here is the so-called Matthew effect: The more stars a company has, the easier it is to develop and retain such high-caliber individuals.”

Three other pieces of advice:

:: Avoid lavishing high salaries on your new star hire; doing so risks demoralizing co-workers. In fact, the authors write, high achievers may be willing to accept a pay cut for the opportunity to work with similarly talented employees.

:: Stars may not have the instinct to play well with others, especially when managerial time and resources are scarce and the urge to compete is greatest. Managers should therefore create a culture of collaboration by encouraging face-to-face contact and building a compensation package that rewards appropriate behaviour.

:: Don’t neglect home-grown talent. By developing high potentials from within and building bench strength, you will be rewarded with greater loyalty and less disruption when a key person leaves.

“What it Takes to Make ‘Star’ Hires Pay Off”, by Boris Groysberg, Linda-Eling Lee, and Robin Abrahams; MIT Sloan Management Review (Vol. 51, No. 2, Winter 2010, pp. 57-61)

photo credit: Noel Feans

Fun is in the eye of the beholder. So it is with workplace fun and the growing efforts by organizations to engage employees with games-playing and other officially-sanctioned hijinks.

Researchers are now turning their attention to measuring when workplace fun initiatives have a positive influence and when they are counterproductive. Eric Lamm and Michael D. Meeks (San Francisco State U), for example, conducted a study to find out whether or not there are generational differences in how workplace fun is viewed, and if there are different outcomes depending on generation.

In the journal Employee Relations, the authors write that, based on generational theory, we would expect to see these attitudes:

Baby boomers (born between 1941 ad 1960): “Boomers’ win-at-all-cost perspective and reliance on success as a measure of self worth likely results in a perception that workplace fun is counterproductive to their competitive edge.”

Gen Xers (born between 1961 and 1980): “Since Xers have a preference for fun and embrace balance in their lives, planned organisational fun activities may engage these sometimes disengaged workers and more fulsomely direct their energy toward the organisation instead of individual, non-work pursuits.”

Millennials (born between 1981 and 2000): “Unlike Boomers, who may oppose workplace fun, and Xers, who may be indifferent to workplace fun, Millennials are likely to regard fun in the workplace not as a benefit, but a requirement.”

Armed with this background, Lamm and Meeks surveyed 701 individuals from all three generational groups. They found that indeed there are measurable generational differences in how workplace fun is regarded.

Millennials, for example, showed stronger links between workplace fun and organizational outcomes such as job satisfaction, task performance, and “organisational citizenship behaviour (OCB).”

Surprisingly, though, the authors found that baby boomers were not as negative about workplace fun as originally thought. “This has large implications because Boomers, with a reputation of ‘achievers at any cost’ and thus regarded as likely impediments to the successful implementation of planned workplace fun, may in fact not only benefit from workplace fun, but may be supportive, whether as a participant employee or facilitating manager.”

“Workplace fun: the moderating effects of generational differences,” by Eric Lamm and Michael D. Meeks, Employee Relations (Vol. 31 No. 6, 2009, pp. 613-631)

If you cannot find this journal is your local library, email me for a copy of the article at Alan [at] AlanMorantz.com

photo credit: inf3ktion

For organizations to be highly innovative, they must be skilled in creativity (R&D) and production (operational execution), with the two sides working together effectively. Seems simple but in most companies, the two capabilities are difficult if not impossible to integrate, say Booz & Company consultants Zia Khan and Jon Katzenbach.

Writing in Strategy+Business, Khan and Katzenbach refer to the two parts of an organization: the formal side with its codified processes, reporting structures, and decision rights (where production mostly sits), and the informal side, with its social networks, shared values, and mutually understood rituals (where the creative work flows).

Organizations tend to favour one side or the other. As a result, there is either wasted effort in chasing too many ideas or an arid environment in which innovators cannot plant roots.

Khan and Katzenbach offer advice on how achieve the production-creativity balance.

“Figure out ways to shape the formal and informal structures together, integrating them from the beginning.” One way is by mapping informal networks to identify patterns in how information flows. Then plant creative and socially adept people in these positions and make use of their networking talents to sharpen ideas and win support.

“Capture budding ideas from the widest possible net and collect them centrally.” Use formal structures to harvest ideas that come up at the water cooler. Example: Starbucks.

“Involve multiple perspectives in ‘go/no-go’ choices from the outset, and thus make them stick.” Find ways to get marketing, finance, and engineering together at the same table for “rigorous and synchronized debate.” Focus the debate on a new idea with these three questions: Will customers want it? Can we produce it? Will we be able to make money from it?

“Motivate the right behaviours.” Celebrate failure as well as success. Use informal communications and formal incentives to support focus and cohesion. Apply the lessons of failed projects to other projects.

The article includes a short case study of Bell Canada as an example of a company getting the creative-production balance right.

“Are you killing enough ideas?” by Zia Khan and Jon Katzenbach; Strategy+Business (Issue 56, Autumn 2009)

Link to Strategy+Business

photo credit: kana76

Here is a nice six-minute story from Fabienne Munch, Director of Ideation at Herman Miller, about how she transformed and energized her 15-member team in the space of five months.

Stealing an idea from Google’s playbook, Munch gave members of her team $5,000 each to pursue an idea of their choice. There were three conditions: the project had to relate to Herman Miller’s mission; the staffers had to invite an outsider to participate; and they had to be open to the idea of pooling resources with their colleagues. At the five-minute mark, Munch talks about what happened next.

In the final two minutes, Munch talks about workplace trends that are informing how Herman Miller is designing work spaces.

Joel Klein, New York City School Chancellor, has some refreshing perspectives on how to manage the human resources of a school system. In the Oct. 12, 2009 issue of Fortune magazine, he talked about paying for performance and empowering principals. Excerpts follow.

On the culture of the public education system in the U.S.:
“Fundamentally, the only differentiator is seniority. The power in the system in fundamentally the power of the bureaucracy, of the political forces, of the union.”

On paying teachers based on performance:
“I think about it this way: Every university I know pays differently for science teachers than it does for English teachers. But I pay the exact same for a science teacher and physical education teacher. And then I pay the same whether you work in my highest-need school or in my most successful school. Money isn’t the only thing that drives teachers. . . but money is an ingredient in the mix of things that matter to people. Fairly compensating them if they take on tougher assignments, if they’re doing the work that’s harder to attract people, like science and math — that seems to me a critical component.”

On empowering principals:
“When I started, superintendents used to pick the principals and then pick the assistant principals. I said, ‘If the principal can’t put together his management team, it’s not going to work.’ And they said, ‘Well, Chancellor, you shouldn’t do that because our principals can’t pick assistant principals.’ I said, ‘If they can’t pick assistant principals, we’ve got to get new principals.’

“Isn’t that ridiculous? Shouldn’t principals be deciding which administrators they need, which guidance counsellors they need, what community programs they want to bring in . . . and start to differentiate based on their challenges and also take some risks in this game?

“I think people would be surprised by this: Every principal in New York City signs an agreement saying what their prerogatives are, what discretion they have, and also what their accountabilities are. And if they don’t meet their accountabilities, we can terminate them or close their schools. We do that. And that’s a very different way of doing business.”

photo credit: azipaybarah

How effective are financial bonuses in motivating employees and reducing absenteeism? To find out, two Dutch researchers, Wolter H.J. Hassink (Utrecht School of Economics) and Pierre Koning (CPB Netherlands Bureau for Economic Policy Analysis), analyzed the effectiveness of a monthly lottery incentive system established by a large Dutch manufacturer to boost attendance.

This is how the lottery worked. At the beginning of each month, the firm identified workers who had taken no sick leave in the previous three months. From this group, seven winners were selected at random. Each lottery winner received a coupon gift with a value of 75 Euros, and their names were publicized company-wide. One other feature: winners were excluded from future lotteries.

The researchers looked at the personnel and absence records of 481 workers over the two years of the program. They found that, relative to the employees’ absence records before the lottery, the monthly incidence of sickness absence decreased by 4.3 percentage points in the lottery’s first seven months and by 1 percentage point in its subsequent seven months. These effects correspond to reductions in the rate of absence of 2.4 and 1.1 percentage points, respectively. In the period in which the lottery was held, the incidence and the rate of absence were 14.8 percent and 4.8 percent, respectively.

“We speculate that the impact on absence rates declined either because workers initially overestimated their odds of winning or because they eventually realized that they were going to win one of the future lotteries anyway,” they write.

Hassink and Koning also found that among workers who won the lottery, absence rates that had declined before they won rose afterward. “Indeed, the estimates suggest a post-win increase in absence.”

On balance, the lottery was beneficial for the firm although its impact tailed off dramatically after several months.

Do Financial Bonuses Reduce Employee Absenteeism? Evidence from a Lottery, by Wolter H.J. Hassink and Pierre Koning; Industrial and Labor Relations Review (Vol. 62, No. 3, April 2009)

Email me for a copy of this paper: Alan [at] AlanMorantz.com

photo credit: CarbonNYC