I recently read the book The First 90 Days: Critical Success Strategies for New Leaders at All Levels by Michael D. Watkins. It was recommended to me as a good guide to starting a new position, and while I admired the structured analytical eye the author takes to understand work challenges, I felt it was lacking in an understanding of human behavior. One key area where the advice particularly seemed to deal with people (in this case, the people reporting to a new manager) as theoretical versus human entities was compensation for performance.
Watkins discusses the need to create incentive and compensation plans that are aligned with goals and workstyles. Some aspects of this are absolutely true: A general truism is that you should reward the behaviors you want to encourage, which could include behaviors like team collaboration or individual productivity. Where the advice on crafting a compensation plan broke down for me was around personalizing rewards to emphasize what the individual most values.
On its face, this is a weird position for me to take. Motivation is highly personal, so why shouldn’t we develop unique incentives for individual employees that align with their sources of motivation?
Watkins thinks about compensation in terms of what he calls push and pull incentives. Push incentives are mainly financial rewards such as salary and bonus, and pull incentives are more conceptual such as excitement about a vision. (It struck me that Watkins does not get very creative with ideas about what pull incentives might be. Motivational psychology might have some thought starters there.) Watkins suggests that some people might need a heavier hand with the push incentives, while others can be motivated with pull incentives.
I disagree with the notion that there is as much leeway with the “push” incentives as Watkins implies. Yes, we know some employees will be more extrinsically motivated than others and those employees will be more responsive to financial rewards. However, it is not usually practically or ethically reasonable to offer wildly divergent financial rewards to people in the same position. There will be a market standard rate for a position which will help set the bottom acceptable amount for a salary and bonus.
I’m taking more of a Maslovian view of job rewards. Everyone requires their basic needs of pay and benefits satisfied to a certain baseline, which I represent as a fair market rate. Some employees, once this basic need is met, may then respond more positively to additional extrinsic rewards, while others prefer recognition or softer rewards (I’d class these with Watkins’ “pull” incentives). Given what we know about the power of intrinsic rewards to support behavior change long-term, we’d want to focus more on developing those types of experiences as part of an incentive design strategy.
Frankly, I’m also concerned that advocating a view of performance rewards where it is ok to offer lower pay to people who are more responsive to “pull” incentives will perpetuate income disparities associated with sex and race. Research on negotiation and communication styles between men and women, for example, leads me to think women might appear more responsive to flattery than men (high-level generalization). Does that make it ok to pay a woman less because you compliment her work more?
My bottom line: Yes, we can and should personalize the mix of rewards we use to motivate individual employees, but the range of personalization is fairly narrow. As employers and managers we have an ethical obligation to distribute wages in accordance with the market value of a particular job and the value of the employee to the business. That means two new hires to the same position in the same company with the same qualifications should receive approximately the same pay, even if one of them really buys into the company vision and the other one longs for a financial bonus.