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REWARDING TALENT

T he reward systems in most organ izations do not focus on skills and competencies, business strategy, team and organ ization per- for mance, or the diff erences that exist in the workforce with re-

spect to what individuals want, need, and value. Instead they still follow a traditional bureaucratic model and are based on job evaluation systems, merit pay, and a fi xed set of fringe benefi ts. Th ese reward systems are usually the same for most or all hourly employees. Salaried workers, executives, and perhaps salespeople usually have plans that are based on job evaluations and include merit pay raises and benefi ts. In some organ izations these plans include stock, profi t sharing, and the giving of bonuses. Overall, however, most reward systems fail to focus on the key issues of today’s work environment.

How do reward systems need to be designed to fi t the organ izations and individuals that operate in the new world of work? Th e answer is obvious: they need to focus on the skills and competencies individuals have, on the contributions that they make to improving orga nizational per for mance, and on the needs, desires, and preferences of employees for cash and noncash compensation. To accomplish this, a reward sys- tem needs to adopt a number of practices that have not yet gained wide- spread ac cep tance and adoption.

PAY F O R S K I L L S , N O T J O B S

Th e predominant compensation approach in corporations dictates that individuals are paid primarily based upon the hierarchical level and

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EBSCO Publishing : eBook Academic Collection (EBSCOhost) - printed on 5/10/2020 12:04 AM via TRIDENT UNIVERSITY AN: 1457718 ; Lawler, Edward E..; Reinventing Talent Management : Principles and Practices for the New World of Work Account: s3642728.main.ehost

76 Reinventing Talent Management

nature of the job they hold and its market rate. Th e key tool in this ap- proach is an evaluation system that scores jobs on a scale of mea sure- ment that examines job attributes. With this methodology and salary surveys, the amount paid to par tic u lar positions within an organ ization can be compared with the pay in other organ izations.

Th e prob lem with basing pay on jobs is that it is individuals, not jobs, that have a value in the labor market. It follows from this that the best way to attract, retain, and motivate skilled talent is to base pay on the skills they have. Today most organ izations do pay some individuals based on the skills they have, but this practice is still the exception rather than the rule. For example, some knowledge workers are paid based on the kind of skills they have, but in many cases these individuals are not paid based upon their individual levels of their expertise but on the type of expertise they have. In many areas, including fi nance, accounting, engineering, and human resources, and certainly in areas like soft ware and vari ous areas of research and development, individuals should be paid based on the kind and level of expertise they have that is relevant to the work they do.

Some organ izations target their pay rates above market levels, others pay at market levels, and others pay below market though they rarely say so publicly. Missing altogether or playing only a minor role in this approach to determining pay is a focus on the skills and knowledge that are critical to an individual’s work per for mance and incentives for in- dividuals to develop and improve those skills and knowledge. Instead, they are incentivized to move on to more highly evaluated jobs because that is the way they can get a pay increase.

Th e movement of Procter & Gamble and other corporations toward self- managing teams in their high involvement management plants, which began in the 1960s, led to the limited adoption of paying people for their skills. Th ese high- involvement workplaces paid individuals based primarily on the number and kind of skills that they had, not on the jobs they were doing at a specifi c point in time. Th is encouraged these individuals to develop a broader understanding of the work pro- cesses, to become more fl exible, and to improve their skills. It was a sig- nifi cant step toward establishing the eff ectiveness of skills- based pay, and it showed that it can replace traditional job evaluation– based pay with a more eff ective approach that contributes directly to orga nizational eff ectiveness.

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Rewarding Talent 77

Th e next step should be the movement of all organ izations toward paying most, if not all, of their talent for the market value of the skills they have that are relevant to the organ ization’s work and strategy. A skills- and knowledge- based system is an excellent way to motivate tal- ent to learn new, critical skills and to help attract and retain individuals with the right skill sets. Because talent, not a job, has value, it can provide a valuable tool for attracting and developing the kind of talent organ- izations need to be competitive in knowledge- based businesses.

A skills- and knowledge- based pay system creates the opportunity to compensate the most valuable individuals above market levels and to encourage people in the organ ization to master those skills that are major determinants of an organ ization’s eff ectiveness. Th is is a key ele ment in creating a talent management system that supports an organ ization’s stra- tegic agenda and agility. For this very reason technology companies in- cluding GoDaddy, Google, and Netfl ix are increasingly adopting this approach, particularly with re spect to their knowledge workers. Th ey de- termine what their talent is paid by looking at what the market pays for individuals with the same or similar skills. For example, individuals are paid based on multiple levels of soft ware skills that are priced according to the market.

Adopting a skills- and knowledge- based pay system is increasingly feasible. More and more data exist on what individuals with par tic u lar skill sets are paid. And with modern information technology, skill as- sessment is easier and more eff ective than ever before. Further, paying for skills is directly tied to the need for organ izations to emphasize agil- ity, develop talent with key skills, and position people as a source of competitive advantage.

Th ere are some key operational issues that appear when organ izations move to a skills- and knowledge- based reward system. For example, de- cisions need to be made about which employees can learn and develop certain skills and eventually whether they have mastered them. Th ere are no easy answers to these issues, but as we will see in chapter 7, they need to be part of the ongoing per for mance management discussions that take place with individuals about their careers and their value to the organ ization.

An organ ization that pays for skills and knowledge needs to make clear statements about when and how decisions will be made about

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78 Reinventing Talent Management

opportunities to learn new skills and acquire new knowledge. Organ- izations also need to be very clear about which skills they need and are willing to pay individuals for having. It makes no sense to simply re- ward individuals for acquiring what are strategically irrelevant skills given their position in the organ ization. A second component that needs to be in place for an eff ective skills- based system to operate is valid mea- sure ment of whether an individual has acquired par tic u lar skills and competencies. How this will be done needs to be made clear in advance, particularly when individuals contract to learn a new skill.

Fi nally, there is the issue of what happens when an organ ization no longer needs a par tic u lar skill set. In today’s rapidly changing environ- ment, this can happen with technical and many other types of skills. Th e best approach here is to let individuals know that the skill (or skills) they are being paid for is no longer needed in the organ ization and to give them a win dow of time to replace it with a new skill that is needed. If they fail to replace it, their pay is reduced because they no longer have the skills that justify their current pay rate.

One pay- for- skills option that can be used in some situations is giving individuals a bonus, one- time recognition, or other reward for learning a new skill. Th is is particularly appropriate when an individu- al’s base pay is already relatively high compared to the market and where a pay increase will put him or her signifi cantly above market levels. Rather than putting the individual into a situation where the salary cost of employment is excessive, he or she can be off ered a one- time cash bonus, stock in the com pany, or some other reward for learning an ad- ditional skill or a new capability.

Given that the nature of work is changing rapidly and new skills need to be learned or acquired in a relatively short period of time, a focus on paying talent based on what it can do is the best approach because it re- wards and motivates skills development. In some cases it is less expen- sive, and in many cases it is more eff ective than replacing individuals with new talent that possesses the desired skills. Th is is particularly likely when the learning time for the needed skills is not long or the market (and market price) for talent with the skills is very high.

Paying for skills fi ts well with how the gig- or talent- demand econ- omy operates: this economy is very much based on paying for what someone can do. Th us, when decisions are being made about how to get

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Rewarding Talent 79

work done (e.g., gig work versus employee work), it makes a direct com- parison much easier.

Yes, paying for skills is a big change, but it is the approach that is needed to move from a bureaucratic job description– based world to the skills- and competencies- based world of agile, eff ective organ izations. It must happen if organ izations hope to change and to motivate indi- viduals to develop the right skills. It also allows an organ ization to pay people in a way that is consistent with the idea that there are certain key skills that need to be rewarded and retained. Paying more for these key skills is a very eff ective way to accomplish this.

Th e market for talent is increasingly becoming a skills- based one. It is no longer primarily a job- based market, and the most eff ective way for an organ ization to attract and retain individuals who have the stra- tegically impor tant skills it needs (or any skills, for that matter) is to base their rewards on what they can do and what the organ ization needs them to do rather than base them on what other organ izations pay people for doing similar jobs.

M A R K E T P O S I T I O N

Simply stated, having high reward levels relative to the market can pay off for an organ ization, particularly when it is done for per for mance and skills that are pivotal. Why? It aids the attraction and retention of all talent, but particularly key talent. Pay and other rewards are key to in- dividuals being attracted to and satisfi ed with how they are treated by an organ ization. Th erefore, it will contribute to a low turnover and a positive buzz about what the organ ization is like as an employer. Of course, it is not the only thing that attracts and retains employees, but it is hard for an organ ization to pres ent itself as an attractive employer when it is absent. Yes, organ izations can emphasize their social purpose and mission, and in some cases this can make up for having a pay and rewards position that is at or below the market level, but this appeals to only a limited number of people and can be a diffi cult position for many organ izations to argue.

Th e key issue with paying above the market rate, of course, is the cost. Can it be justifi ed? Frequently it can be if it reduces turnover and attracts a better quality workforce. But there is an additional consideration:

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80 Reinventing Talent Management

whether an organ ization expects and demands above- market per for- mance from its employees. If it does this by terminating those individuals who are below market in their per for mance and skills, it is an eff ective approach to determining where the pay and rewards levels are set in an organ ization.

Netfl ix is a good example of an organ ization that has a high- pay, high- performance culture. Th e com pany makes it very clear that indi- viduals who do not perform above the market level will not continue to be employed. It also makes it clear to its talent that it pays above- market wages with the expectation of per for mance that is also above market. Th is gives Netfl ix the advantage of legitimately being able to set high goals for individuals and having credibility when it removes average and below- average performers. It also attracts individuals who have self- confi dence and believe that they are high performers.

In a pay system where the amount of pay is based on the skills indi- viduals have, it is impor tant to allow for and enable adjustments in pay when individuals learn new skills and when the market for their skills changes. Th is may mean more than an annual change in an individu- al’s pay. At the very least, all individuals should be reviewed every year— and in the case of key talent, every quarter—to be sure that their pay level is at the appropriate market position. If it is below market, they should be granted a salary increase to bring them up to what ever posi- tion in the market has been targeted for the skills they have. As noted already, in most cases this means an above- market position. If the mar- ket for their skills has actually decreased, they should be given a freeze notice rather than a pay decrease. Th is means that their pay will not be moved up unless and until the market for their skills moves above what they are currently being paid.

P E R F O R M A N C E - B A S E D R E WA R D S

Th e evidence is clear: basing rewards on per for mance can be a power- ful motivator of per for mance. Rewarding per for mance is not only an eff ective motivator of per for mance, it is a way to attract and retain the best performers. In order to motivate per for mance, rewards need to be clearly connected to per for mance, and they need to be impor tant. Fre- quently organ izations try to accomplish this by giving the highest

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Rewarding Talent 81

salary increases to their best performers and through the use of profi t- sharing plans, stock plans, and bonuses. Organ izations also sometimes create a variety of recognition programs that reward per for mance. All of these are viable ways to create a meaningful connection between pay and per for mance, but vary greatly in their eff ectiveness.

Th e least eff ective way to reward per for mance using fi nancial incen- tives is to give “merit” salary increases; it also is the method most fre- quently used. Among the reasons for its low eff ectiveness is that the amount of money available tends to be very much determined by infl a- tion, not per for mance. As a result, in many time periods the salary in- crease bud get is so small that it is impossible to create a meaningful reward diff erence between good performers and poor performers. Sim- ply stated, a 3  percent merit bud get is hard to divide up in ways that leads good performers to feel they have received signifi cantly more than lower- level performers.

Profi t sharing and stock owner ship plans can have a positive impact on talent per for mance, attraction, and retention. Th ey will not work for all talent, but they will for most. With re spect to per for mance, the im- pact of profi t sharing plans on talent motivation is likely to be minor unless the amount received can be tied directly to an individual’s or small group’s per for mance. Th e prob lem is that most individuals do not see a clear connection between their per for mance and their reward amount when it is based on organ ization per for mance. Th is prob lem is even greater for stock owner ship plans. However, like profi t sharing plans, they can help create a culture of involvement, attraction, and re- tention if they lead to above- market compensation levels.

What is needed for a pay plan to have a major impact on motivation is a bonus plan that has a level of funding and a mea sure ment approach that allows it to make a diff erence of at least 9  percent between what good per for mance earns and what poor per for mance earns. Th e amount of bonus can be determined by a bud geted amount or triggered by vari- ous levels and kinds of orga nizational eff ectiveness— for example, com- pany profi t.

Driving the amount of money in a bonus plan off orga nizational per- for mance has a number of advantages, including causing talent to focus not only on their individual per for mance but also on orga nizational per for mance. Th e negative in this approach is that when individuals

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82 Reinventing Talent Management

perform well but the organ ization does not, even the good performers will receive little or no bonus. As a result, they may see little connection between their per for mance and their reward.

Th e right mix of individually determined and collectively determined rewards is very situational; there is no answer that is always best. A care- ful analy sis is needed of the organ ization’s business model and the degree to which individuals are best focused on their own per for mance, on the organ ization’s per for mance, and on how volatile the organ ization’s overall results are likely to be. What needs to be true, in almost all bonus periods, is that there is money available, and individuals who perform well get a signifi cant bonus at the end of the period.

Th ere are some conditions under which paying for per for mance makes sense for temporary, short- term, contract, and gig employees. If they have a carefully prescribed task to perform with measureable out- comes, a very strong case can be made for rewarding them based on their per for mance. Since in most cases they have no chance at being given a full- time job or being rewarded in other ways for their per for- mance, off ering them a fi nancial incentive that is based on their per for- mance fi ts a need and makes a great deal of sense. What kind of fi nancial incentive is appropriate? Th e answer in most cases is cash, since it has a universal high value.

In the case of most nonemployee talent, cash rewards should be based on individual per for mance. Th ere are some situations where a group in- centive is appropriate— primarily those where a cooperative group task is involved and per for mance is best or only mea sur able at the group level. In any case, it should be an immediate reward clearly tied to mea- sur able per for mance during the time nonemployees are doing work for the organ ization. It is impor tant that the nature of the deal be presented to the individuals when they agree to do the work. Th ey should also be given ongoing feedback on how well they are performing relative to their opportunity to earn a reward.

One additional note. In some cases it may be particularly impor tant for temporary or short- term workers to have an incentive to perform well. In cases where they are paid on an hourly basis, the incentive for them is in the direction of performing slowly or in a “reserved” man- ner. Th e major reason is that once these individuals fi nish their gig, they may be out of work because they do not have another gig lined up. As a

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Rewarding Talent 83

result, rather than being motivated to perform well, they are motivated to perform at the lowest pos si ble level of productivity that they can get away with to prolong their work relationship. Pay for per for mance can motivate them to perform more rapidly. It is not an “every thing” solu- tion, but it can bring an impor tant motivator into play for employees that are not regular employees of the organ ization.

Overall, the most generally applicable approach to paying talent for per for mance is some combination of a bud geted bonus plan that rewards individual per for mance and a business unit or a corporate performance– funded bonus plan like profi t sharing. Th ese two approaches to paying for per for mance should be designed to operate relatively in de pen dently, so that if the organ ization does not do well, individu- als who perform well can be rewarded based on the money put aside for individual bonuses.

Bonuses for individuals should not replace market adjustments to base pay; they should be paid out based on per for mance, not market movement. Th e combination of market and per for mance pay gives in- dividuals the chance to increase their base pay because of changes in the market and/or in their skills, and to receive a bonus or merit salary in- crease based on their individual per for mance. Th is design has the ad- vantage of creating a per for mance focus on the part of individuals because it provides a high level of assurance that if they perform well, they will be rewarded for it. It also has the advantage of keeping the pay of an organ ization’s talent in line with the market so there is no threat of losing them for pay reasons.

R E WA R D S E G M E N TAT I O N A N D C H O I C E

Many organ izations give diff er ent kinds of rewards to individuals at diff er- ent levels in the hierarchy and in diff er ent types of jobs. For example, se- nior executives oft en receive stock and very diff er ent benefi ts from those given to lower- level employees. In the 1970s some organ izations began using fl exible or “cafeteria” style benefi t plans that off ered all employees a choice of what “fringe” benefi ts they receive. In these plans, individuals are given a “bud get” and allowed to “buy” the benefi ts they want.

Recently, a number of companies have taken the reward choice idea to in ter est ing new levels. First, they have increased the benefi ts and

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84 Reinventing Talent Management

perks they off er to job holders. Today, particularly in Silicon Valley and in technology fi rms in general, employees can choose to have concierge ser vices, extra vacation days, engage in vari ous kinds of on- site physi- cal exercise (Ping- Pong is popu lar in Silicon Valley fi rms), partake of entertainment, and go to a cafeteria with many food options. Th e real- ity is that individuals value rewards diff erently, and that to optimize the return on the investment organ izations make in them, it makes sense to try to match the rewards to the preferences of individuals. In the ab- sence of this, organ izations may give individuals rewards (fringe bene- fi ts, in par tic u lar) that are valued at a level that is below their cost— not a good way to spend compensation money.

Th e key point here is that individuals increasingly diff er in what they value and what they want. As a result, choice is a winner; it helps assure that what organ izations give to individuals are things that they want and value.

Admittedly, choice can go too far and organ izations can end up at- tracting and retaining individuals for the wrong reasons or spending more than they need to because they give things or amounts that are not impor tant when it comes to the attraction, retention, and per for- mance of talent. Th is is particularly true in cases where individuals are given vari ous kinds of recreation and off - the- job benefi ts that are not performance- based rewards and do not add to their ability to perform their work. Indeed, they may distract individuals from doing their jobs and developing their job- related skills. Admittedly, they may help at- tract and retain some talent, but it may not be the right talent, and the price may be too high. Th is is particularly true when the benefi ts are available to all employees at no cost. Unlike fl exible benefi t plans, in these plans, oft en there is no limit placed on how many ser vices and options individuals can choose, and no trade- off choices need be made.

Th e answer to the eff ectiveness question with re spect to most non- fi nancial benefi ts can only be determined by analyzing usage, reten- tion, and per for mance data. Now that so much data exist and can be analyzed, it is pos si ble to make evidence- based decisions about the eff ec- tiveness of most reward programs. Some reward preference data can be gathered using opinion surveys and other tools that indicate employees’ preferences for diff er ent kinds of rewards. In most cases, however, the best data on preferences and the best way to ensure that the rewards

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Rewarding Talent 85

chosen are the right ones comes from giving individuals a choice of rewards. If they have a choice that includes cash, they will consistently pick benefi ts that have a high value to them, and as a result, the organ- ization will receive a good return on its reward costs.

What should not be lost in the fascination with nontraditional bene- fi ts, and the changes that are occurring in the kinds of rewards some organ izations are off ering today, is that members of the workforce diff er dramatically in what they value and what attracts and retains them. Th is fundamental point means that organ izations cannot rely on a relatively small number of reward types and that they need to allow in- dividuals to determine what they receive in order to get full value for the cost of the rewards. Putting together a package of rewards that most or all individuals will value, at or above cost, is becoming an increasingly complex task. Th us, a limited predetermined set of rewards for individ- uals is becoming less and less the way to operate. It is simply not likely to produce a high “hit” rate and a good return on the cost of the rewards.

Fi nally, it is impor tant for organ izations to determine which rewards attract and retain the right employees. It may be that retention can be improved by off ering Ping- Pong and dry cleaning, but who does it at- tract and retain? Is it the most cost- eff ective way to retain the best per- formers? Little research exists that answers these questions. In most cases, they are best answered by organ izations using analytics and re- search evidence that focuses on their workforce and looks at how eff ec- tive diff er ent rewards are at attracting and retaining talent.

P U B L I C PAY

Most organ izations keep the pay levels of many of their employees se- cret. Th ere is, however, a growing trend toward making pay data public. Many organ izations now give out the pay ranges for jobs and the ranges for bonuses, but the pay of most individuals is still kept secret in most private sector organ izations in the Amer i cas, Asia, and Eu rope.

Th ere are a number of arguments in favor of secrecy. According to traditional wisdom, it prevents comparisons that are disturbing to in- dividuals, protects rights of privacy, and in general leads to more eff ec- tive pay administration because decision makers do not have to be worried about negative reactions to their decisions.

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86 Reinventing Talent Management

Th ere is no doubt that keeping pay secret does prevent some disrup- tions that might occur if pay information were public knowledge. It makes it impossible for individuals to see whether they are paid more or less than others whom they may think are less—or for that matter, more— deserving. But it also allows age, race, and gender discrimina- tion to go unmonitored, and it makes it impossible for individuals to know whether they and others are paid according to com pany policy. It is one thing for an organ ization to say that pay is based on per for mance; it is quite another for its members to be able to see that it is. Fi nally, secrecy makes it impossible to hold man ag ers and organ izations ac- countable for their decisions regarding pay, and as a result, they oft en make worse decisions than they would make if they were held publi- cally accountable.

Overall, there are good reasons to believe that public disclosure of pay rates will lead to pay being more fairly administered and to a posi- tive impact in the workplace. My research shows that with secrecy, individuals misperceive what others make. In general, they tend to overestimate the pay of individuals at their level and as a result they feel their own pay is lower relative to others than it actually is. Th e result is lower motivation, more dissatisfaction, and a greater risk of turnover.

Secrecy can make it less clear that a strong positive relationship be- tween pay and per for mance exists and as a result, can decrease the mo- tivation of individuals. Of course, in all too many cases, pay is not tied to per for mance and thus making pay public will just prove to employ- ees that there is no relationship. Th e answer here is to create the con- nection and make it public. It is not—as is oft en done in organ izations that practice secrecy— saying there is such a connection when in fact there is none and hoping that it will be believed.

Slowly but surely, pay information is being made public by organ- izations, but the movement is far too slow. A wild card with re spect to making pay public are employment review websites like Glassdoor, which put pay data that is given to them by employees into the public domain. Th e prob lem with Glassdoor and similar sites making pay rates public is that they may not have accurate or complete data, and there- fore, what is made public ends up hurting an organ ization more than if the organ ization itself made its actual pay data public.

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Rewarding Talent 87

For de cades I have advised organ izations to make pay public, and they frequently agree with the idea, but they typically point out that they need a “few years” to get their organ ization’s pay system and rates to where they feel comfortable making them public (secrecy tends to lead to indefensible decisions). Th e prob lem is that when I check in with them aft er those “few years” have passed, they typically have not made the improvements that are needed to have defensible pay rates and, as a result, making pay public is delayed further. Th e reason for this is what caused the pay system to get to an indefensible position in the fi rst place: with secrecy, an organ ization is not and cannot be held account- able by employees for its pay decisions.

Recently, the growing diversity of the workforce has raised an in- creasing number of questions about the fairness of pay and the ten- dency for women and minorities to be paid less than white men. It is suspected and oft en true, but it is hard for individuals to challenge most pay decisions because they do not have data to support their claims. Th is has led to more demands that pay be made public so clarity can be de- veloped about the pay practices of organ izations and about the treat- ment of women and minorities. Th e proliferation of pay information on social media forums may be an indicator that many younger individu- als do not support pay secrecy and that in the future there will be more public pressure to make pay information public.

Th ere is an increasing amount of legislation in the United States that requires some pay information to be made public. It is likely that this trend will continue. Although it may not go as far as organ izations be- ing required to make the pay of their individual employees public, this may eventually happen, just as it happened de cades ago for top execu- tives and has happened for all employees in some countries.

One fi nal issue with re spect to pay secrecy is the hacking of com pany computer systems and the potential it has to make pay information pub- lic. Th is is just what happened to Sony when its salary database in the United States was hacked by the North Korean government.

At this point it seems safe to assume that any organ ization’s pay data can be hacked and made public. What should organ izations do about this? Th ey can, of course, install greater cybersecurity, but there is a bet- ter, simpler alternative: make pay public and administer it in a way that

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88 Reinventing Talent Management

is defensible. Th is is more likely to increase orga nizational eff ectiveness and to cost less in the long run. Making pay public will improve per for- mance if it shows a clear connection between pay and per for mance, since this will actually end up motivating individuals to improve their skills and perform better. Overall, making pay and reward practices public is potentially a win- win situation if an organ ization has rea- sonable, defensible, and strategically aligned pay policies and reward practices.

C O N C L U S I O N

Traditional reward system practices do not fi t well in organ izations built for the new world of work. As table 6.1 shows, practices need to be much more strategic and more focused on keeping, attracting, and retaining individuals with the right skills. One way to accomplish this is to focus the base pay system of organ izations on an individual’s skill set. In this approach, individuals are paid for the skills they have that are relevant to their contribution to the organ ization’s per for mance and strategy. To align a skills- based approach to pay with an organ ization’s strategy, those skills that are strategically impor tant should be more highly re- warded relative to the market than are less- important skills. Th e reason for this is simple: the retention and attraction of individuals with key skills is essential to implementing an organ ization’s strategy.

Pay for per for mance should also be an impor tant part of an organ- ization’s reward system. In most cases, today’s and tomorrow’s organ- izations should have systems that target both individual and collective

Table 6.1 Rewarding talent

Strategy driven Target key skills for higher pay; Reward key per for mance

Skills based Base pay rates on skills

Per for mance focused

Reward individual, team, and organ ization per for mance with bonuses and stock

Agile Reward skill development to fi t the need for agility

Segmented Diff er ent amounts and kinds of rewards based on skills and per for mance; reward choices available

Evidence based Analyze per for mance of individuals making diff er ent reward choices; analyze impact of rewards on per for mance, turnover, and attraction

Copyright © Edward E. Lawler III and Center for Eff ective Organ izations at USC.

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Rewarding Talent 89

per for mance with a multitude of rewards. Indeed, the kind and amount of rewards individuals get in most cases should refl ect their choices and their individual work situations. Too oft en, given the diverse nature of today’s workplace, the rewards that traditional organ izations off er are not valued highly by a signifi cant portion of the workforce relative to their cost. Choice and variety are the answer here, not steering away from rewarding per for mance.

Th e complex issues that are raised as a result of today’s new work- force and workplaces very much require an evidence- based approach to rewards. Data need to be gathered about which rewards are attracting the right kind of employees, how eff ective rewards systems are in moti- vating per for mance, and the attraction and retention rates that are pro- duced by vari ous reward system practices. Given the dynamic nature of the workforce and workplace, evidence needs to be continuously gath- ered. Surveys and per for mance mea sures should be used to determine how eff ective the reward systems in organ izations are at leading to strat- egy implementation and orga nizational per for mance.

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