Recognizing Organizations as Eco-systems
Living species prosper or fail depending on how well they fit the eco-system within which they exist. Employees prosper or fail depending on how well they fit the organization within which they are employed. Workforce management strategies and systems succeed or fail depending on how well they fit the current organizational context.?
Searching for the one “best” strategy and system for attracting and retaining the workforce all organizations need is futile. When asked “what kind of ____ (staffing; development; performance management; rewards management) strategy should we have?” by an organization my answer has always been (with no sarcastic intent) “the one that best fits you.”? Fads come and go, created and fueled by claims in the literature that one approach has been shown to succeed 100% of the time. This supposedly is evidence that it is surely “the new best thing.”? Success with a strategy often prompts someone to write an article or give a presentation demonstrating their professional excellence.? Few want to document their failures. As a result, the literature is biased. Even academic journals only publish studies when the hypothesis was supported by results, even though failure can be a valuable source of learning.
The Impact of Diverse Workforces
Eco-systems thrive or fail depending on the compatibility of their component parts. Their viability also depends on the degree to which they are compatible with the context within which they function.?
The increased global mobility of talent, accompanied by the ability to work anytime and anywhere for many, has increased the diversity of workforces. Culture must promote cohesiveness, enabling the organization to deal with the challenges of internal integration and external adaptation. When the component parts of the workforce function well with each other it enables the organization to adapt to environmental change effectively.?
Differences in the cultural orientation of employees can make identifying the right strategies difficult, since expectations differ. When co-authoring the book “Rewarding Performance Globally” with Fons Trompenaars we used his extensive research related to managing across cultures to tell a story about a U.S. multinational attempting to install the same performance and rewards management philosophy and strategy globally. Because of differences in the way people are socialized (by their family, their peers, their educators and by the society) different cultural profiles tend to prevail in different countries and ethnic enclaves. There is a tendency for collectivist orientations to be common in Eastern and Southern regions, while a more individualistic orientation is common in Northern and Western regions. This is a generalization, since some Frenchmen behave more like some Japanese people than some Japanese people. This overlap makes it necessary to be cautious in anticipating an individual’s cultural profile and their likely preferences. Yet, cross-cultural research can be useful in anticipating potential reactions to strategies when operating globally.?
In addition to national/ethnic cultural orientation there may also be generational and occupational differences. Generational differences pose a challenge, since differential treatment based on age would not be accepted and may even be illegal. However, due to the different nature of occupations, it may be possible to customize strategies and programs that recognize significantly different work and its impact on organizational performance.
Components of the value proposition offered by an organization can be the same or similar across the workforce. Employee benefit plans (health care; retirement; vacation) generally are the same. However, there is a way for employees to customize benefits packages in a manner that provides them the maximum perceived value for the amount the organization is willing to spend. Flexible benefits programs make room for employee choice and help to maximize the employer’s ROI. For example, an employee might be allowed to “sell back” vacation or sick days at 1/260 of annual income and to use those funds to acquire more of what is valued and needed more. Flexible benefit programs can address generational differences and individual preferences. It can also enable employees to align their current packages to current needs.
Compensation plans can be more varied. Executive/managerial incentive plans often use organizational or unit performance as their metric. Sales incentive plans generally use individual sales volume as their metric, although the profitability of the revenue or what is sold may also be measured and considered. By considering both organization/unit and individual performance compensation plans can be devised that fit both organizational requirements and employee preferences. “Merit” (pay for performance) plans enable the appropriate performance criteria to be measured and rewarded. But they can produce competitive behavior between peers whose increases must come out of the same budget. If cooperative behavior is necessary, the organization must find a way to motivate the right behavior.
Employees participating in collective bargaining units may also be treated differently. The nature of the bargaining process frequently results in a “same for everyone” approach to base pay management. In the public sector a significant percentage of employees are unionized, which can result in pay systems that are less than ideal for professional employees. There has been an increased recognition that “same” does not translate to “ideal.” A survey that I managed included over 1,000 water utilities showed that over a ten plus year period the number of automatic step-rate systems declined from over 2/3 of the utilities to less than 1/3. The inability to reward top performers results in a system that does not appeal to those the organization most wants to attract and retain. Since municipal utilities often have separate oversight boards, they are free to pursue the strategy that is most effective, free of the necessity to use plans the city or county use. As a result, they may be able to have more appeal to highly motivated people, since they will offer high performers rewards for their contributions.
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Promoting Internal Integration
The nature of work has become diverse. The evolution of technology continuously creates a demand for new skills and a more agile workforce. This can result in “skill silos” that make it difficult to design compensation programs that are a good fit to all employees. Professionals are often focused on their careers more than the entity employing them, since they tend to be more mobile. Their standing in an occupation is the principal determinant of their market worth, which also contributes to an external focus.
Although diversity may require diffferent approaches a strong case can be made for having at least one “shared destiny” plan that fosters a “we” rather than a “me” mindset. For example, an incentive plan tied to organizational performance can provide the message that integrating everyone’s efforts increases the likelihood of success. When organizations are publicly traded the use of broad-based stock ownership can also align employee fortunes with those of their employer.? Another approach available to organizations with defined contribution retirement plans is to tie the annual contribution rate to performance. For example, a guarantee of a 50% match to employee contributions up to some maximum may be established. In addition, if organizational performance exceeds the business plan a higher match may be promised. This strategy avoids the escalation of fixed costs that base pay increases cause, and aligns rewards with performance and the ability to pay.
Conclusion
Organizational ecosystems are also a part of a larger environment and are impacted by its nature. Recent turmoil in labor markets has impacted strategies for defining, measuring and rewarding performance. Although objectives may have stayed the same “how” they are achieved may have to change. Agility is a pre-requisite for continued performance in a turbulent environment.? Continuously altering workforce planning, performance management and rewards management systems may be the price for sustaining a good fit to the environment.
Robert Greene, PhD, is CEO at Reward $ystems, Inc., a Consulting Principal at Pontifex and a faculty member for DePaul University in their MSHR and MBA programs. Greene?speaks and teaches globally?on human resource management. His consulting practice is focused on helping organizations succeed through people. Greene has written 4 books and hundreds of articles about human resource management throughout his career.