03: A Behavioural Framework for Compensation

Universal Basic Income = Basic Rewards Strategy

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Rob Wilson/Shutterstock

A fundamental premise of any compensation strategy is that the system of rewards has (as noted in our text) “a powerful effect on behaviour.” This effect can be positive if the rewards system is built within the framework of organizational justice. If individuals perceive that rewards provide for fair outcomes resulting from fair processes, they will believe and behave in a way that supports the rewards strategy. This forms part of the psychological contract with the organization.

On the other hand, if individuals do not believe that the rewards system is equitable or fair, their behaviour follows a negative path of dissatisfaction, disengagement, and, ultimately, total disconnection from the organization. This disconnection is either voluntary, in the form of a quit, or involuntary, as the organization has to make the ‘quit’ decision for the individual. The result is that both the physical employment contract, as well as the psychological contract, with the organization are severed completely.

When we expand the concept of the organization to the broader social community, we can see the direct and powerful impact of rewards system(s) provided by government relief programs through the continuing pandemic crisis. Millions of Canadians are out of work, and they face devastating consequences if they cannot afford to pay for basic provisions, such as food and shelter. Financial income programs, such as the Canadian Emergency Response Benefit (CERB), are able to provide some relief to many unemployed Canadians, which allows them to meet, to some degree, their basic needs. This emergency rewards system is not perfect, but it does alleviate some financial pressures. Furthermore, the distribution of the CERB funds appears to be based on a perceived system of organizational justice where the process and the rewards are equitable, meaning that the same rules apply to everyone and the distributed funds are the same.

Does the CERB funding provide for an increase in the psychological contract within our social communities? According to Maslow’s hierarchy of needs, when survival and basic needs are met, individuals are able to move toward social needs. This need is one of social belonging, which, from a compensation strategy application, speaks to membership behaviour and commitment. Once individuals have a sense of belonging, they can progress along Maslow’s theoretical hierarchy to meet esteem and self-actualization needs. When people are able to function beyond meeting their basic needs, they are able to be engaged and committed to the larger community.

With this in mind, the question of continuing funding, such as that provided by the CERB, as a universal basic income strategy for all Canadians, comes into play. It may be time to continue the path to a universal basic income strategy, as companies and economies start the very slow path to recovery from the pandemic. The positive aspects on a global perspective of a basic income strategy are explored in this article posted by the CBC. The article presents an interesting perspective that a basic income strategy provides for more motivation for individuals to work, which seems to link directly to the positive aspects of a psychological social contract. John Michael McGrath provides us with this opinion piece, in which he explores the impact of ongoing economic change, including the need for a basic income strategy, as we move into a post-pandemic world of work.

As noted in both articles, and based on our own pandemic experiences, we know there is no going backward once this crisis is over. The movement forward, however, provides such great opportunities for social change and economic justice. Let’s make it work for everyone.

Discussion Questions:

  1. In your opinion, how does the concept of a universal basic income align with the principles of procedural and distributive justice?
  2. How would a universal basic income provide a remedy for the four causes of reward dissatisfaction?
  3. In your opinion, would a universal basic income increase or decrease the personal motivation of individuals to find paid employment?

How to Bring the Apple Consumer Culture to HR

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Apple has long been recognized as a leader in creating innovative customer experiences, which is one of the reasons the company has developed what some consider a cult-like following. What would happen if HR could create a similar experience for their employees?

The Harvard Business Review (HBR) suggests that the concept of employee engagement is waning and that the true organizational leaders of tomorrow will concentrate on the “Employee Experience.” It is the employee experience that will shape employee engagement.

Research indicates that companies should care deeply about employee engagement. Gallup has found that, “companies with highly engaged workforces outperform their peers by 147% in earnings per share.”

What CEO would not want to see a 147% increase in share price?

Expanding on this research, HR needs to start treating employees like customers. This is not a particularly new idea. HR has attempted to treat its employees more like customers for years. However, it is now time to continue that trend, and to succeed in creating more positive employee experiences.

There are two fundamental concepts in developing a customer experience strategy for employees; the concept of segmentation and the customer journey. The following HBR article summarizes these two concepts.

Click here to read the article.

If organizations what to improve their corporate results, perhaps they should think about changing their employment engagement philosophy to one that truly focuses on the employee experience, which will in turn improve employee performance.

Discussion Questions:

  1. After reading the HBR article, create a journey map to improve the employee experience. Choose an organization that you are familiar with, or somewhere you have worked in the past.
  2. Think about a job you have had in the past. How would your relationship with that company have been different if they had treated you like a customer?

When Incentives Backfire

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Performance incentives may do more harm than good.

backfired Amazing drift car
Kárpáti Tamás/Shutterstock

In the summer months I drive a 40-year-old British sports car and occasionally it will backfire. A backfire happens when the car’s internal combustion engine decides to have a moment of external combustion and the whole neighborhood hears about it.

There can be many reasons for a car to backfire: wrong air/fuel mix, spark plug timing or just an exhaust problem. When it happens, I know the car is not performing at its best and something needs to be addressed.

The same thing can happen in the workplace with performance incentive plans. They sometimes backfire, and that backfire turns into real-world blow-back with significant consequences. Recent examples have happened in the banking industry:

  • Wells Fargo fined $185 million for pressuring employees to sell.

 Click here to read about Wells Fargo

  • TD Bank faces allegations that its employees broke the law to meet sales targets.

Click here to read about TD and its selling tactics.

The purpose of performance incentives is to encourage employees to display behaviours that are above the basics of task behaviour. In the HR world, we call this organizational citizenship behaviour. When we think of the citizenship behaviour we default to a very positive image of workers going above and beyond the call of duty. But, in reality, going above and beyond the call of duty can have disastrous effects when it is linked to a poorly developed sales incentive program. Poorly designed programs can create very successful anti- citizenship behaviour that supports the dark side of business plans.

Both TD and Wells Fargo had well-intentioned sale incentive programs designed to raise organizational performance in terms of profit. However, for both organizations, the profit motive became unhinged from the organization’s ethics and negative things happened. Employees become whistle-blowers and companies now face the blow-back of legal action, ethical complaints and very bad public relations.

There is always a right and a wrong way to implement a performance incentive program in an organization. When the company gets it right there is recognition as a top employer. When the company gets it wrong, there is always blow-back.

Question

  1. Do some research and find a workplace incentive plan that went wrong. Compare and contrast what went wrong to the Society of Human Resources Management (SHRM) suggestions on how to implement an effective incentive plan.

Click here to read about the SHRM’s suggestions.

Motivation Gone Mad

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Concept of failure of a businessman--man fed to sharks
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Our compensation studies focus on the push and pull of organizational rewards systems, and their direct link to employee behaviours. These systems are built on theories of human motivation, which guide our thinking about the way employees are supposed to react and respond in order to achieve organizational goals.

Usually these rewards systems focus on positive outcomes based on targeted goals. Positive outcomes are meant to reinforce constructive employee behaviours. What happens, however, when the pressure to achieve an expected goal overwhelms the employee’s ability to behave in a positive way?

The TD Bank Group has been in the news recently due to its targeted sales practices that have resulted in allegations of unethical and possibly illegal employee behaviours.

Click here to view the CBC report.

Click here to view the follow up CBC report.

While the allegations by employees in these reports are shocking, the revenue goals for the bank have been achieved. Bank profits have increased. Sales targets have been met. Underperforming employees have been placed on ‘Performance Improvement Plans’ to align expected behaviours with targeted sales-based performance objectives.

The questions must be asked: At what cost? Do the ends, in this particular situation, really justify the means?

This case appears to provide an extreme example of fear-based motivation. Fear of job-loss overrides the ethical judgement of employees and forces them into negative behaviours. The negative behaviours have a lesser consequence for employees than that of losing their jobs. In the context of Maslow’s hierarchy of needs theory (outlined in our compensation studies), job-loss for these employees means that they will be unable to provide food and shelter for themselves and their families. The choice to ensure that an employee’s personal food and shelter needs are met has a stronger pull than making ethically sound decisions for others.

This case points an accusing finger, not at the individual employees, but at the senior executive managers within the TD Bank Group, and at the system of rewards that are in place to motivate and influence the whole.

Discussion Questions:

  1. After reviewing the two articles, identify specific elements of motivational theory that are evident in employee reactions.
  2. As a bank manager, what types of rewards would you implement in order to influence employees to achieve profit-related targets?
  3. As an employee required to achieve these types of sales targets, how would you respond? What decisions would you make based on your personal ethics and values?