The Paycheck - A Lousy Management Tool...

I was looking for a profound way to discuss the importance of reward and recognition within an organization and bumped up against a post on Fast Company, highlighting a discussion with David Glazer, an engineering Director at Google.  The discussion centered around how Google maintains its creative culture and innovative edge.

From the article:

"There's an old Peter Drucker line that goes, 'If you ever really want to learn how to be a manager, go work with volunteers.' Because when you manage volunteers, you realize that the paycheck is actually a lousy management tool. It has almost nothing to do with how you manage and motivate and organize and excite people. It can become a crutch, right? And in that sense, not in the financial sense, but in the 'build something great, change the world' sense, everyone at Google is a volunteer."

Operative phrase:  "... the paycheck is actually a lousy management tool."

I don't highlight the phrase to tick off any compensation consultants, because I know that pay can be used to focus attention and drive behaviors. 

But... I do think that if we take a step back, we can make this point about pay versus other recognition/reward strategies.

Pay is transactional - it creates a different connection to the company than the idea of "build something great" as highlighted in the quote.  I posted on my home site on creating an emotional connection to program goals and objectives the other day and I think this post ties in nicely with that one.

Ask yourself this... If you didn't pay your folks how would you achieve your goals?  If you remove the constraint of "pay" from discussions on engaging your employees, it forces you to think of them as volunteers - and with volunteers - you need to create a mission, a passion - that will drive performance.  Creating recognition and non-compensation rewards around that passion will create the second tier of effort - the ability to go past the transaction of a paycheck - to truly make a difference. 

Pay cannot transcend transactional performance and create a passion.  Those who are passionate about their pay are mercenaries.  Those who are passionate about their mission are martyrs (I don't suggest the employees need to die for their passion, but I couldn't think of a word that started with "m" to keep the alliteration going.)

Move past transactions into passions.

Comments

[Ann Bares]

Paul:

Not only do I agree with you, but I'm going to go out on a limb and say that any compensation consultant who doesn't recognize the lousiness of relying on a paycheck to motivate people isn't a compensation consultant you'd want serving your organization. There is a prevalent and unfortunate tendency to use pay - particularly incentives - as a substitute for good management and communication practices. And I think your challenge to approach motivation with money removed from the equation (i.e., with a staff of volunteers) is a powerful one. Great post!

[marenhogan]

Nice idea. Maybe the professional definition is wrong but I think compensation refers to more than a paycheck anyway. Like volunteers are compensated with recognition (sometimes) and a great feeling (most of the time) and the appreciation of those they have helped (a good deal of the time unless you are volunteering at Entitled Anonymous). I think every single workplace has something unique, interesting, cool or fun that they can be offering, in lieu of monetary compensation (i.e. a paycheck). Great post.

[Kris]

Here's my two cents. I think pay is a entry point in the conversation, then other factors drive retention and protect you against the competition stealing your talent for a 10% pay hike...

However - I'm leary of Google being linked with the example of managing volunteers (I realize this is a small part of Paul's post, but the implication is pretty clear in terms of why the guy was quoted from the source). I like the idea that if you can motivate volunteers, then you are connecting them with the mission.

However, based on the fringe benefit levels, you can't say Google is that company. Seems very cool at the moment, but lets face it, many, many people are there to try and become millionares.

Yahoo was Google a decade ago.

[Paul Hebert]

I'd agree that Google is a bad example since they have a large upside on compensation through stock. But Drucker's line is the key - pay is a lousy management tool. If you manage behavior through money you get the effort commensurate with the money. Management through vision using non-pay rewards and recognition is what fuels truly heroic efforts.

[Beth]

I freakin heart this posting. Pay IS a lousy mgmt tool... but that's only assuming what you are paying is competitive with the market. One would hope that the average employee has 1/2 a brain, if that's the case, then Joe Employee will leave your company in a heartbeat to work for one of your competitors earning more money.
So assuming (& yes i know what assuming does) your employees' comp is in line with the market - then YES, pay is a crap for a managment and motivational tool.
Speaking as someone who REALLY loves their job (& probably a little too much, like most work aholics, it's my drug of choice).... my career is my motivator. Notice i typed CAREER - not job. A job is temporary, i focus on how my job fits in with my career path at my employer. Thus offering employees a career path they are excited about WILL motivate them... worked for me anyways.

[KD]

Beth -

Please hire me as your department's HR coordinator!!!

But pay me above market rate.

KD