Can You Make a Case For “Unfair” Pay in Your Organization?

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Laszlo Bock, Senior VP of People Operations at Google, has a new book titled Work Rules! hitting the market this month.

As to be expected, there’s been a good deal of news coverage, excerpts and blogs about it, including this one in Fortune with Mr. Bock’s 10 Things to Transform Your Team and Your Workplace.

Today, I’d like to call your attention to two of these.

“Unfair” pay is really another term for “merit” pay

No. 7 on Mr. Bock’s list is “Pay unfairly” with this comment:

Ninety percent or more of the value on your teams comes from the top 10 percent. As a result, your best people are worth far more than your average people. They might be worth 50 percent more than your average people or 50 times more, but they are absolutely worth more. Make sure they feel it. Even if you don’t have the financial resources to provide huge differences in pay, providing greater differences will mean something.”

To compensation pros, I’m sure this isn’t groundbreaking. I’ll ask my colleagues at the Compensation Café to weigh in, but this seems to me the principle behind the idea of merit pay (at least as originally designed).

I agree with this approach. Those who work harder and deliver more value deserve more pay. It’s the last line in the above quotation that gives me pause.

We’ve all seen “merit pay” differentials erode in the last several years with top performers getting, perhaps, a 3 percent pay increase vs. average performers receiving a 2 percent increase. Considering this is barely above a cost-of-living increase, I wonder if the difference is enough to drive the desired impact.

Helping employees see their greater value

So, yes, you should pay unfairly, but don’t rely on that as a sole differentiator to set apart exceptional effort. Additionally, help employees (at all levels of performance) see the greater value of what they do, which is Mr. Lazlo’s first tip: “Give your work meaning.”

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Work consumes at least one-third of your life and half your waking hours. It can and ought to be more than a means to an end. In too many environments, a job is just a paycheck. But as Wharton professor Adam Grant’s work demonstrated, even a small connection to the people who benefit from your work not only improves productivity but also makes people happier. And everyone wants his work to have purpose. Connect it to an idea or a value that transcends the day to day and that also honestly reflects what you are doing.”

Help people draw this connection. When people demonstrate desired behaviors in line with core values or strategic objectives, recognize them for it. Make this recognition quite explicit to help them connect the dots and see the deeper meaning.

It takes pay AND recognition

Better yet, offer differentiated recognition awards calibrated to various factors such as level of effort, contribution, and result achieved. This enables you to involve more people (hopefully, the vast majority of employees) in recognition activities while also ensuring those who go above-and-beyond are recognized as doing so.

Once again, it’s the combination of pay and recognition that drives the greatest reward for employees – of all abilities and levels.

What would be on your list of ways to transform your team or workplace?

This was originally published at the Compensation Café blog, where you can find a daily dose of caffeinated conversation on everything compensation.

Derek Irvine is one of the world’s foremost experts on employee recognition and engagement, helping business leaders set a higher vision and ambition for their company culture. As the Vice President of Client Strategy and Consulting at Globoforce, Derek helps clients — including some of world’s most admired companies such as Proctor and Gamble, Intuit, KPMG, and Thomson Reuters — leverage recognition strategies and best practices to better manage company culture, elevate employee engagement, increase retention, and improve the bottom line. He's also a renowned speaker and co-author of Winning with a Culture of Recognition. Contact him at irvine@globoforce.com.

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