Compensation

Compensation

notes

Becoming a more effective organisation (company, business) necessitates a whole passle of far-reaching changes. It starts – more or less – with mindset, of individuals, and of the collective. But the ripples spread out across the face of the organisation into all its corners.

Just one of these many corners is the compensation scheme.

The Americans call it compensation, in the UK we call it salary, wages, pay or rate. I like the word compensation. It reminds me that paying people is more about compensating them for all the crap they have to put up with in their eternal struggle to do even a half-decent job, than it is about paying them for the job itself. I’ve long held the opinion that for people who’re doing a job they love, getting paid for it is an irrelevance. Although we all have to keep a roof over our heads, of course.

In the typical Analytic organisation, the basis and rationale for compensation is rarely if ever discussed. It’s one of the many “givens” that brook no discussion. Some widely considered bases for compensation include:

  • Piecework – pay by the unit of output.
  • Time – pay by the hour or day.
  • Fixed rate – pay by the month or year-divided-by-12.
  • Bonus – Additional pay for qualifying Individuals or groups, often contingent.
  • Equity – a share in the success of a product or company.

And most Analytic organisations have a byzantine structure of pay-grades, bands, etc. where folks have to “slot in” dependent on various factors such as age, seniority, time with the company, etc..

The Agile Way

In adopting, say, Agile software development (a toe-in-the-water approach to shifting towards a Synergistic mindset), compensation rarely changes its status to “discussable”. There arises a troubling dissonance around:

a) The long-standing assumption that pay is a motivator.
b) A dawning realisation that pay is not a motivator.

And the basis for compensating e.g. developers is rarely included in the Agile adoption agenda.

If we took it seriously, of course (the Agile adoption, that is), then compensation would perhaps get considered along with the technical practices, self-organisaing teams, changes in job title and roles, etc.. Not as a direct motivational factor, but as something that impacts on folks’ sense of fairness, and thus their attitude, morale, and, ultimately, productivity (via discretionary effort).

Follow the Dominoes

If we follow of the whole line of dominoes to the end, then we might realise that:

  • Most folks are far more sensitive to what’s fair, than to other aspects of compensation policy.
  • As the system (the way the work works) accounts for 95% of an individual’s productivity, then maybe making 95% of an individual’s compensation contingent on the way the work works might make sense. At least, consider making a connection between an individual’s compensation and their contribution to the way the work works (although that contribution is governed by the system, too).
  • Self-organisation, turned up to 11, means teams organising their own compensation, too.

At Familiar, we took a simple Occam’s Razor approach to cut through all this. We chose to believe that only the person in question had an unequivocal understanding of their own needs, vis-a-vis compensation, and of their own work/contribution/value-add. So, in line with the Antimatter Principle, each person got to set their own compensation level/rate/terms. That seemed to work pretty well.

Would you be willing to begin making this topic discussable within your organisation?

– Bob

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