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Trust, not money, coaxes the best from employees

Show of hands

An article by former departmental secretary Allan Hawke published in the Canberra Times 6th May 2014, referred to our research and provided a voice for our advice to clients. Money matters, but not enough to outweigh workplace culture issues.

The Public Sector Informant: May issue

My next sequence of articles will cover issues such as balanced scorecards, diversity, personal productivity and staff engagement. But, before turning to those, I want to touch briefly on performance pay, what individuals want in the workplace, an associated people leadership model, and a ”plan on a page” design to help meet those ends.

Those interested in a detailed treatment of the performance pay oxymoron can access a separate paper on that topic I wrote in 2012.[1] That led to a Community and Public Sector Union blog inviting performance pay fans to argue the case in favour – no advocate was prepared to do so!

In my view, there is no place for performance pay in an apolitical, merit-based bureaucracy devoted to accountability and serving the government of the day. The Australian Public Service would be a better place if it reverted to a practice of having the same pay range for each classification level across the service.

Convention has it that the private sector must focus on shareholder value and profitability – otherwise, firms go out of business. Yet current reality bears no relation to that theory (see, for example, Greg Smith’s resignation letter from Goldman Sachs and the nonsensical remuneration market for chief executives).

Enormous bonuses encourage excessive risk-taking[2] and everyone involved in chief executives’ remuneration has a vested interest in preserving the system. For example, head hunters are usually paid a percentage of the first year’s package, so they have a strong incentive to bid that up.

Performance pay acolytes (usually in an unstated way or subconscious manner) believe a reservoir of withheld effort must be coaxed or coerced out of people. This is the underlying premise for incentive pay programs and managers’ efforts to motivate and control their workforce.[3] Such schemes promote subordinate sycophancy, cronyism and brown nosing. Proponents seem entirely oblivious that they are seeking mutually exclusive outcomes: that you can reward heroic individuals disproportionately while still expecting teamwork.

In The new ecology of leadership, David Hurst distinguishes between the negative effects of ”stretch goals” for assessing performance and their positive effect when used for learning and development purposes. The former leads to ”dysfunctional and unethical behaviour, and poor performance because feedback is seen as reflecting on personal ability and thus threatening”.

Consider these examples:

A mortgage broker fudged figures to get rich through upfront and trailing lines of commission in a West Australian sub-prime outrage.
An executive at the Canberra Hospital doctored data to make the hospital’s outcomes look better, influencing COAG health reform incentive payments.
A bank chief executive on about $27,400 a day argued that people on unemployment benefits of $34 a day get too much.
Twenty-six United States companies paid their chief executives more in 2012 than they paid the federal government in tax.

When bonuses are on offer, people focus their efforts on gaming the system. I suspect ”performance pay” was at the root of the Australian Wheat Board and Reserve Bank/Note Printing Australia/Securency scandals. The curious combination of Australian Swimming allowing Nick D’Arcy to holiday in Europe and introducing a different remuneration regime in 2012 skewed to Olympic gold medals, with predictable results, is a lesson in its own right.

Money matters – of course – but it doesn’t matter enough to outweigh workplace culture issues. A total remuneration package approach, which offers individual choice in the way the package is constructed, is helpful. However, if the workplace culture is perceived (rightly or wrongly) as being anti-people, then no money will fix the associated recruitment and retention problems. In a similar vein, people join organisations and leave bad bosses.

The more sustainable solution revolves around people giving you a fair day’s work if they receive what they consider to be a fair day’s pay. If they don’t feel they are fairly paid, they become dissatisfied. Their expectations here are principally affected by what they see other people who do similar work receiving: the ”market wage”. If that precondition is met, then people look for other things.

As will be obvious from my past articles, I argue that executives whose people achieve better performance (in terms of productivity, cost, job satisfaction, turnover, absenteeism, etc) lead differently compared with their counterparts who oversee poorer performance. Those with the better record focus their attention on the people side to build effective work groups.

Executives need their staff to perceive them as someone who believes a high level of performance is crucial. Enthusiasm about the importance of the work combined with a conviction that what they are doing adds value to the purpose contributes to high performance. If you expect the best of your people, you will often get it.

Being unselfish, cooperative, sympathetic, democratic and genuinely interested in individuals helps the cause.

Good bosses:

  • set the standard for performance;
  • give meaningful direction;
  • prioritise communication;
  • create the climate for achievement; and
  • persist until each task is well and truly done.

Alistair Mant was struck by the similarity of this to recent research based on reverse-engineering leadership as experienced by real people in real life, which boils it down to the ART of leadership, or, as he put it, TRA:

Think: my boss is smart (smarter than me; strategic; understands and communicates context).
Relate: my boss is quasi-parental (really understands and cares for me and my career)
Act: my boss is powerful/decisive.[4]

This is all about helping people be better; promoting knowledge, empowerment, focus and ownership; improving through involvement instead of imposition; capturing hearts and minds in accordance with this table (click on the image to view a larger version):

It’s still common for people to only find out what their bosses think of them at a forced, annual performance-assessment chat or when they see what has been said about them in a referee’s report for a promotion. The ”plan on a page” below is a better approach, particularly where employees and supervisors take the time to meet face-to-face on a monthly basis to discuss progress, focus on learning and development, and explore what the employee may do to work towards their aspirations.

(Each section below should be signed and dated by the employee and their supervisor. All four sections should fit on one page.)

Part A: Key performance indicators.
Part B: Learning and development needs and actions.
Part C: Performance review notes.
Part D: Learning and development activities undertaken and their effectiveness.

Australians regard ”feedback” as a pejorative term, linking it with bad news and a way of disguising one’s true intent, which is to criticise and apportion blame. Recognition/acknowledgement that facilitates the ”volunteer” mode needs to be sincere and low key. Effusive praise embarrasses Australians as being ”over the top”.[5] Appropriate recognition is the breakfast of champions.

Anecdotal evidence suggests that ”performance management feedback” is triggering an increase in stress-related Comcare claims and associated allegations of bullying and harassment. It may well be the endemic carrot-and-stick approach that’s behind this emerging pandemic. In workplaces where this is happening, however, it is not serving as a sign to those in charge that they need to review management practices, particularly the pervasive command-and-control fetish that still preoccupies so many managers.

Analysis of a 2011 study of workplace behaviour[6] contradicts academic and practitioner notions of bullying, finding that it:

  • happens mostly between peers;
  • exists at all levels of an organisation;
  • is mostly oral;
  • occurs as part of normal, day-to-day operations; and
  • is sometimes perpetrated strategically during meetings when superiors are present.

Renewal is not the same as change! When the findings of the study cited above about poor behavior, victimisation and discrimination are taken in conjunction with those about bullying, a macro-perspective emerges, which is something like this:

  • The organisation’s business model defines the games that are to be played.
  • The organisation’s systems and processes, including its culture, provide the rules for the games.
  • Insecure people and those who flout the common good bend the rules the most.
  • When the games are played out as tournaments, people pick on those who are different and who challenge the pecking order, in a way that is dictated by the organisation’s change or renewal cycle.

Because people are likely to be at their most secure when there is a meaningful common purpose (i.e. renewal), this model predicts that the lowest incidence of poor behaviours will be in organisations that constantly renew themselves, as opposed to those that are constantly changing or are in the other quadrants shown below:[7]

Dr Allan Hawke is a former departmental secretary and diplomat, a former Australian National University chancellor, and a chairman and director of several organisations.

Notes:

1. John Wanna, Sam Vincent and Andrew Podger (editors), With the benefit of hindsight, chapter 3 (by Allan Hawke): ”Performance management and the performance pay paradox”, ANU Press, 2012.

2. An adjunct professor at the University of Technology, Sydney’s Centre for Capital Market Dysfunctionality, Jack Gray, wants someone to fund a prize for the economist who can come up with a genuine market for chief executives’ salaries.

3. Alfie Kohn, Punished by rewards, Houghton Mifflin, 1993 & 1999.

4. See also Google’s Project Oxygen research.

5. See John Evans’s work cited in the December 2013 Informant.

6. Those seeking more details of these soon-to-be-published findings can email Stuart King at Risk to Business John Evans.

7. King and Evans, op. cit.