How a “Pay-to-Quit” Strategy Can Reveal Your Most Motivated Employees

Companies often have a hard time determining how motivated or committed their employees are, because employees know it goes against their own interests to declare themselves unmotivated or uncommitted. The solution to this problem is for companies to put incentives in place that encourage employees to reveal how they actually feel. In this article, the author, a behavioral economist, describes an incentive plan that has … [ Read more ]

Pay for Performance: When Does It Fail?

The consensus in social psychology is that monetary incentives for performance have a detrimental impact on individual performance. Yes, under certain specific and limited conditions, rewards can reduce performance. Yet pay for performance schemes are ubiquitous. How can we resolve this divergence between theoretical recommendations and observed practices? Nirmalya Kumar and Madan Pillutla recommend solving the problem by designing smarter incentives that avoid these detrimental … [ Read more ]

Nirmalya Kumar, Madan Pillutla

In order to understand the undermining effects of rewards, we must consider how the recipients are likely to interpret them. Specifically, the effects of a reward depend on how it affects the recipient’s perceptions of autonomy and competence. When monetary incentives interfere with an individual’s sense of autonomy or competence, they tend to decrease intrinsic motivation.

Ulrich Pidun, Sebastian Stange

In most firms, incentives are tied to company or business unit performance. The consequences of large investment decisions typically take too long to materialize to have an impact on an executive’s bonus or promotion. This can lead to moral hazard, especially when managers expect to move on after a couple of years in a position.

We recommend tying personal targets and incentives to the success of … [ Read more ]

Sally Helgesen, Fred Kofman

The exclusive focus on monetary rewards inevitably leaves organizations fighting a fierce but losing struggle to balance individual and team results. Rewarding high performers serves the imperatives of accountability and excellence but can undermine alignment and cooperation among team members. Yet basing pay on team results in order to incentivize collaboration often ends up inadvertently rewarding subpar individual performance and penalizing individual excellence. Neither approach … [ Read more ]

Selina Lo

In my company, there is a rule that all new managers need to know: that it’s not a given that their people [under them] will be paid less than they are. That’s part of becoming a manager—that you really have to enjoy enabling people. I want people who are good managers to be managers. I don’t want people to become managers just because they feel … [ Read more ]

Gender Pay Gap: Valuing Women’s Work

A new study published in Nature Human Behaviour sheds light on the role of within-job pay differences in the gender pay gap.

Meka Asonye

You get the behavior that your comp plan designs for. In the early days, I prefer to keep comp plans simple with two metrics, max. I also love plans that have a component focused on the entire customer lifecycle. For example, comping teams on bookings and retention can be a powerful way to ensure teams pursue the right users who will be longtime customers.

12 New Approaches To Compensation

In an unprecedented time for attracting and retaining talent, CEOs and CHROs are getting creative—from three-day workweeks at full-time status to paid mental-health days to raised wages. Here’s what a dozen leaders told us they are doing differently.

Don Otvos

You always want to compensate your reps based on what they can actually control. You want to tie as much of people’s compensation as you can to things like “meetings set” or “demos given” — actual activities. When you’re at a startup, it’s hard to figure out what your quotas should be — there’s usually no precedent, so you throw a number out there, and … [ Read more ]

How to Identify — and Fix — Pay Inequality at Your Company

Companies who say they care about inclusion and belonging can start by paying employees fairly. To start, initiate a pay equity audit in which you compare the pay of employees doing “like for like” work (accounting for reasonable differentials, such as work experience, credentials and job performance) and investigate the causes of any pay differences that cannot be justified. Next, determine how you’ll remediate … [ Read more ]

Adam Bryant, David Reimer

A company’s most powerful cultural signals aren’t communicated by talking points. They’re determined by who gets promoted and who receives outsized rewards. Yet compensation and bonus frameworks in most organizations are still based almost solely upon financial results. In an effort to rule out subjectivity, such plans emphasize — and often focus exclusively on — achieving numerical targets. This oversimplified focus on the what of … [ Read more ]

Incentives for a Strong Leadership Culture

Three key pay and performance metrics can help define and influence an organization’s values.

Bethanye McKinney Blount

Compensation is culture, period. It’s how you pay your people and it’s where the rubber hits the road. It’s the metric you can’t cheat. It’s naive to think that you’re just going to give people money and they’re not going to feel everything that’s attached to it. Pay is incredibly personal and emotionally charged. It directly affects how we live our lives and how we … [ Read more ]

Bethanye McKinney Blount

When you start talking about pay transparency, the first thing everyone thinks is “I’m going to know how much everybody makes.” I think a better way to frame it is “I’m going to understand why I’m paid what I’m paid and how I can increase my comp.” It’s about making sure employees understand their current reality and see a career development path in front of … [ Read more ]

Research: Better-Managed Companies Pay Employees More Equally

Companies that implement more structured management practices pay their employees more equally. We found that companies that reported more structured management practices according to the Management and Organizational Practices Survey (MOPS) paid their employees more equally, as measured by the difference between pay for workers at the 90th (top) and 10th (bottom) percentiles within each firm.

Opening Up About Comp Isn’t Easy — Here’s How to Get More Transparent

As a two-time founder and a seasoned engineering leader, Bethanye McKinney Blount has seen misunderstanding around comp rear its head time and time again. And in her experience, this hesitation to pull back the curtain on paychecks and think more deliberately about a compensation philosophy tends to cause problems down the line as startups scale. In this exclusive interview, Blount tackles the thorny questions startups … [ Read more ]

Forget Cash. Here are Better Ways to Motivate Employees

In today’s tight job market, employers must focus on how to attract and keep top talent. Giving away stacks of money may not always be the best incentive.

Josh Bersin

Much research shows that pay is a “hygiene factor,” not an “engagement factor.” In other words, in most cases if compensation is not high enough, people will leave—but increasing compensation does not directly increase engagement (with certain exceptions).