Ducks in a Row: Pay-for-performance Kills Employee Engagement
by Miki Saxon
With 68% of employees disengaged, you would think the board’s critical eye would be turned on the executive suite.
You would think wrong.
One of the greatest causes of disengagement is the difference in compensation between the CEO/executives and the workers.
That difference is the direct result pay-for-performance, coupled with the board’s ego-driven competitiveness and desire for bragging rights.
Name the most brilliant, talented, past or present CEO you can think of, then remove them from their position.
The company may hiccup, but it won’t go down in flames.
Now remove all the line managers/team leaders OR all the workers in a specific department or with a specific talent and watch the company stagger and fall on its face.
An unintended consequence of pay-for-performance is we treat companies as if they are in the airline business, except the only person who matters is the pilot—not the grounds crew, nor the quality control tinkerers, nor the guys who wrangled the ore and fuel from the ground, forged the parts, tightened the bolts and soldered the frame.
In their rush to acquire the “best” talent, boards are likely to forget that corporations are not independent entities
It’s a group of people all moving in the same direction, united in a shared vision and their efforts to reach a common goal.
To move in the same direction people need to be engaged.
But how engaged would you be when the proceeds of your hard work show up in someone else’s paycheck?
In the 1970s, shareholders took out about 50% of a company’s profits, while the rest was reinvested in the productive capacity of the firm, including R&D to employee training and rewards. Today, the shareholder gets over 90% between dividends and share buybacks. Today, a 60% or greater weight on equity or equivalents is the norm in pay packages.
Dominantly CEO/ senior pay packages.
The funny thing is that rank and file aren’t looking for similar pay.
They are looking for fairness in relative pay.
Image credit: JustyCinMD
