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The importance of fair compensation

Jul 17th

As the economy starts to recover, it’s important leaders pay close attention to how people are compensated. This issue also includes: drive vs. bullying at work; the shift to long-term planning; and learning to listen.

Editor’s view

The importance of fair compensation

As we start to take the first tentative steps towards a recovery, it’s critical as a leader to pay close attention to how you’re compensating your people.

A recent seminar at the London Business School, Evolutionary approaches to Leadership, Management, and Organisational Performance, brought to my attention the importance of our evolutionary past in shaping organisational behaviour. The recent emergence of this field of evolutionary psychology has given rise to a greater understanding of areas of organisational behaviour from hierarchy, power and meritocracy to negotiations and even marketing.

In the current climate, where both private and public sector organisations have been cutting salaries and clamping down on bonuses at tremendous rates, compensation is becoming more important to employees than ever before. Evolutionary theory explains that humans possess an innate desire to be compensated ‘fairly’.

A group member, or employee, tends to regard ‘fair’ compensation as proportional to the value of the contribution to his/her co-workers (and fairness concerns tend to be in relation to relative rather than absolute rewards). Those who feel they are being ‘unfairly’ compensated, in relation to others within or outside their organisations, are likely to lose motivation and begin to look elsewhere for jobs.

In the current climate, and as we move out of a recession and more jobs become available, organisations should be thinking carefully about how they retain employees and ensure that they are committed and motivated. Ensuring that your employees feel ‘fairly’ compensated is a good place to start. For some this might involve introducing performance related pay, for others it may be important to look more closely at the overall compensation package, from salaries and bonuses to less tangible benefits such as recognition, additional days leave and flexible working hours. Understanding what your employees value will help you, so why not find ways to ask them, perhaps in your next staff survey?

A key to a successful business is having a happy, motivated and committed workforce; this will be critical for the year ahead.

In the news

Drive vs. bullying at work

With the recent media storm surrounding Gordon Brown’s alleged temper outbursts, it makes one wonder, what is acceptable behaviour at work? and when did having a ‘fire in your belly’ become a negative?

What is acceptable behaviour at work? The issue is at the heart of the media storm that has raged around the publication of Andrew Rawsley’s book, ‘The End of the Party’, that accuses Gordon Brown of outbursts of bad temper and bullying of junior staff. The problem is that it’s all so subjective. So while some will see only drive, energy and occasional impatience, others will feel intimidated and fearful.

Rawnsley is indisputably right, however, when he says, “The psychology of the men at the top has mattered more than in any [previous] government.” The way we look at leaders has changed. The cult of personality and celebrity, fed by the internet, means the behaviour of people in the public eye is a target for intense scrutiny and judgments. And this is no less true for managers.

But suppressing negative emotions is not the answer, either. A Harvard Medical School study that followed 824 people over 44 years found that those who repressed frustration were three times more likely to say they had reached a glass ceiling. It concluded: ‘Individuals who learn to express their anger while avoiding…unbridled fury…have achieved something incredibly powerful. If we define and harness those skills, we can use them to achieve great things.”

A good place to start is with a psychometric instrument like the Hogan leadership forecast, which maps eleven behavioural ‘de-railers’ onto individual personality type. Understanding these (often unconscious) behaviours and what triggers them is a good basis for coaching. Taking this seriously will avoid the unintended consequences of unmanaged behaviour that can detract from your achievements.

Tip of the month

The shift to long-term planning

This month’s editor, Anna Simpson, looks at how to make the shift from the reactive, short-term approach necessary in previous years, to a longer-term strategic view.

The year 2009 was a year with a short-term focus: will we pay our bills this month; will we have to make cuts; will we survive or won’t we? At the heart of the economic downturn, many organisations felt uncertain about the future and focused on the immediacy of the short term rather than looking ahead.

The new year presents an opportunity for organisations to shift their focus from the short-term to the long-term, from acting reactively to engaging in long-term strategic planning processes. In order to achieve their strategic goals in 2010, organisations need to ensure that they are forward thinking, fit for purpose and ready to respond to any challenges they face.

To shift the focus from short term to long term, organisations and leaders should be doing the following things:

  • challenge short-term thinking and ask yourself what the implications will be in one, three and five years time
  • look ahead and encourage others to do the same – it’s not just the here and now that’s important
  • engage in business planning with a long-term goal in mind, making sure you involve your employees in the process
  • develop your talent management strategy to ensure you have the right people to drive your business in the future; as Jim Collins explains in his book Good to Great, getting the “right people on the bus” is key to a successful business.

Your questions answered

I’ve been given some feedback from colleagues that they don’t feel I listen to them. I’m keen to develop my listening skills but don’t know where to start. Can you help?

Listening can be hard to do and even harder to do well. A lot of us are not good listeners, even those who may think they are. Humans have an innate desire to be understood and so it’s important to get this skill right (and great that you are prepared to work at it). By practising listening and by becoming aware of the different types of listening, you can work to become a better and more effective listener.

We all reach different forms and levels of listening, but many of us never achieve true empathic listening, a term used by Steven Covey to refer to listening where you really seek to understand emotionally as well as intellectually.

Follow the steps below and you should be well on your way to becoming a more effective and empathic listener:

  • write down some examples of good and bad listening, reflect on when you do these things
  • note your barriers to listening: what prevents you from being a good listener?

practice listening with friends and colleagues or engage in role play:
– take a few minutes to prepare mentally for the conversation, ensure your own thoughts, worries and concerns are put to one side
– pay attention from the start, concentrate with your eyes and your ears and be aware of your body language
– listen to the themes emerging from the conversation, mimic and rephrase the content to show that you are listening and demonstrate that you understand how they are feeling.

This article is filed under: Change, employee motivation, , leadership, leadership development, people, strategic communication, strategy, strategy development, team leadership, workforce management

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