Are Pay Boundaries Empowering or Demotivating?

One of the challenges in compensation design and management is building programs that reward workers fairly, competitively and in ways that engage them in the success of the enterprise — without creating a sense of entitlement. Especially when it seems as though entitlement is hard-wired into our culture.

That’s why I read Whitney Johnson’s Harvard Business Review blog post “Battling Entitlement, The Innovation Killer” with such interest.

It may be five years old, but it is still relevant. In it, she speaks of all the ways we inadvertently reinforce a sense of entitlement — with our children, with our employees, even with our executives. And she points out that accountability, and the act of holding people accountable, is the direct opposite of entitlement. Then she shared a claim that really stood out for me, about innovation and about the downside of protecting people from limits and consequences: Boundaries and challenges can empower and embolden us.

This got me to thinking. Practically speaking, our reward programs tend to be full of boundaries. Just a few examples:

Salary ranges (Underlying Boundary Message: This is the highest fixed salary we are willing to pay for the job you are currently performing.)

Performance goals (Underlying Boundary Message:  Your performance will not be considered to exceed expectations unless you accomplish X.)

Salary increase guidelines (Underlying Boundary Message: This is the largest salary increase you can earn at your current level of performance.)

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Group incentive plan structure (Underlying Boundary Message: No awards will be earned unless the company achieves a net income of X.)

The question is this: Are we positioning and communicating these boundaries in a way that empowers and emboldens employees? Are we presenting these limits in a way that inspires employees to accomplish the things necessary to move beyond them?

Could we do better?

(And might this notion apply to real life as well?)

Ann Bares is the Managing Partner of Altura Consulting Group. She has over 20 years of experience consulting in compensation and performance management and has worked with a variety of organizations in auditing, designing and implementing executive compensation plans, base salary structures, variable and incentive compensation programs, sales compensation programs, and performance management systems.

Her clients have included public and privately held businesses, both for-profit and not-for-profit organizations, early stage entrepreneurial organizations and larger established companies. Ann also teaches at the University of Minnesota and Concordia University.

Contact her at abares@alturaconsultinggroup.com.

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