The concept of “fair wages”

This is a concept that needs a great deal of contemplation!

I am sure there are many of us who cannot quite determine how we get paid and that certainly results in disconcerted feelings of unfairness.

Hopefully this essay will provide some food for thought in understanding the causes of these feelings.

Let it be known that global pay systems are usually based on three principles; 1) paying for the job – this is the traditional pay system with salary grades, classifications and pay ranges, and other obfuscations, 2) paying for skills – this system pays for now what are called competencies which days gone by were called knowledge, skills and abilities, you get paid whether you actually contribute or not, 3) paying on the basis of purely the market. Find out what your organization’s pay system is all about within the context given above. If an organization pays for the job, more often than not this organization is traditional, rigid and bureaucratic. Paying for skills, knowledge or competency is actually great, but there is a certification process involved, and this system requires a lot of administration. Paying on the basis of purely the market is the most equitable methodology because it focuses the pay system directly into the economic dimensions of employment. Such a system requires that your organization has access to market data and that the data is believable and acceptable. In addition to the methodologies to determine base – or what I call “come to work pay” – there are merit systems that pay incremental increases to cover the “cost of living” and job performance as laid out by senior management. Other types of programs include bonuses, cash profit sharing and long term cash bonuses, milestone bonuses and employee referral payments.  Then there stock or other equity related compensation programs for some or all employees. This is also a good practice and in the dotcom era made a lot of employees millionaires. Greed motivated executives take home astronomical sums of money courtesy of these equity based programs. All of these are organizational behavior scenarios which one can learn to navigate through. But whether you are paid equitably or not is quite subjective and it depends on your concept of “felt fair pay”. So compare your pay with others in a similar position within your company or with others in other companies holding similar positions as you and then you can determine whether you are paid fairly or not. Fairness also depends on whether you understand the processes and methods to determine your starting pay or even when an organization doles out annual increases or bonuses or any other compensation scheme. Fairness depends on what, how and why you are paid. Research evidence shows that if employees do not know the what, how and why of their pay system as it relates to them then the employee’ pay perception does not equate fairness.

—Akerlof and Yellen (1990),  building on work from psychology, sociology, and personnel management, introduce “the fair wage-effort hypothesis”, which states that workers form a notion of the fair wage, and if the actual wage is lower, withdraw effort in proportion, so that, depending on the wage-effort elasticity and the costs to the firm of shirking, the fair wage may form a key part of the wage bargain.

—A crucial point (as noted in Akerlof 1982) is that notions of fairness depend on the status quo and other reference points.  — —Experiments (Fehr and Schmidt 2000) and surveys (Kahneman, Knetsch and Thaler 1986) indicate that people have clear notions of fairness based on particular reference points (disagreements can arise in the choice of reference point) — —Thus for example firms who raise prices or lower wages to take advantage of increased demand or increased labor supply are frequently perceived as acting unfairly, where the same changes are deemed relatively acceptable when the firm makes them due to increased costs (Kahneman et al) — — In other words, in people’s intuitive “naïve accounting” (Rabin 1993), a key role is played by the idea of entitlements embodied in reference points (although as Dufwenberg and Kirchsteiger 2000 point out, there may be informational problems, eg for workers in determining what the firm’s profit actually is, given tax avoidance and stock-price considerations) — —.

So in summary whether “fairness” exists in a pay system depends on all the following factors:

1. Whether the pay processes are understood by the various stakeholders.

2. Fairness is directly correlated to the “secrecy” of the pay system. The more secret the pay system the more unfair is the perception.

3. Also “fairness” depends on an individual’s personal comparators or reference points.

4. Finally, recent research shows that “fairness” is part and parcel of how an employees perceives the pay system as “appropriate” to the individual’s needs.

Thus an organization’s pay system needs to devote more time on the employee “demand” side of the pay equation.

The Performance Management Mythology

Most organizations profess to practice performance management. This is myth? Because most organizations do not engage in true performance management. There are many reasons for the perpetuation of this myth, which I will be discussing in this oped piece. The intentions are noble but execution suffers from the intense realities of a frail psychological eco-system that exists in most organizations.

What do I mean by the phrase “a frail psychological eco-system” ? In reality managers who have to discriminate and weed out the “good”, “the bad” and the “not so bad” employees do not exercise the mental and verbal disciplines of managing employee performance – that is confronting the non-performers and rewarding the better ones. All of us like to be good guys and gals and we really do not want to sit in judgement of others, lest others also judge us unfairly. We are all very insecure in organizations that have all kept us on our toes with job insecurity. It is much easier to be delightful rather than being a nasty truth seeker. Thus most managers take the path of least resistance – we tend to evaluate everyone at average or above. Listen, why would a manager want to rate someone poor or extremely bad? Does that not reflect bad on the manager themselves? One can tell a manager you have “bad” employees because you are a bad manager. Ever thought of this dimension before? So the main reason performance management is a myth is the fact that the results of the process is skewed towards the upper end of the performance rating scale. 

A corollary to this dimension most organizations use a “performance appraisal” system to evaluate employee. These systems to say the least are subjective but tend to attempt objectivity with the imposition of a rating scale, Well guess what, based in the argument presented in the previous paragraph the evaluators exercise “skewed” rating profiles – most of the ratings are average or above. If there was indeed a true performance management system then one would have seen a more normal distribution. This is not reality, the reality is an upward distribution rating profile.

Then take the case of “Executive Compensation Madness”. Today one can find a negative correlation between the growth in executive compensation and the growth in corporate profits. Executives make the big bucks in spite of not making the necessary profits to satisfy share-holder interests. Thus when there is really no executive performance management why should managers practice what the executives preach but do not practice. There is no “walking the talk”. So most organizations mossy along their merry way, by giving lip service to performance management and engage in maximizing the accouterments of the system, rather than practicing the organizational philosophy in its true spirit.

Also in recent times there has been a marked “softening” of the workplace. Form has replaced substance. It is very important now to be “sensitive” towards the feelings of others. Behavioral dimensions are emphasized as much if not more than skills, knowledge and abilities when performance judgements are made. Thus by its very nature good or bad behavior is judgmental and thus subjective. Beauty is in the eye of the beholder. Hard facts are sacrificed in comparison to results. Managers are being judged on their abilities to show empathy. All of this mussy stuff is not conducive to hard factual of performance based on results.

And finally the connection between pay and performance is almost a joke. whenever an organization ties the performance management system in time with the pay management process they write themselves the ticket to total disaster. When a manager is giving an employee a performance appraisal and the employee knows that at the end of that session, the manager is going to tell the employee how much of a pay increase they are going to get, you can bet your bottom dollar that the employee is thinking “boss cut performance appraisal non-sense, just tell how much of a pay increase am I going to get”. “Show me the Money!” In this scenario the employee gives a deaf ear to anything the manager is saying about their performance – good, bad or indifferent. The management of performance is a “holistic” process. As long as practice ties pay to it then the value of a performance dialogue between manager and subordinate goes out the window.

So I say do away with formal performance appraisals systems. They do not work. Over my long career in the many organizations I have been associated with, I do not know of a single organization that can hold their heads high and say that their performance management/appraisal system works. When you do away with these HR perpetuated systems much overhead expenses will be saved.  Make it informal. Leave it up to your managers. Encourage continually performance management dialogue between managers and employees. Don’t introduce or use rating based appraisal processes. Because as soon as you do that you introduce a negative “punished by rewards” culture.

Performance Management as currently practiced only introduces negative angst into the culture thus destroying morale and motivation.

Pay Knowledge = Pay Satisfaction

Many years ago when I read Dr. Ed. Lawler’s book “Pay and Organizational Development” I had discovered this research based theoretical construct. Ever sine then I have seen the validity of this concept in real life.

The more employees know about their pay – how the pay determination process works and how the individual pay decision that affects them was made, the more satisfied with pay the employee will be. Transparency  with everything about pay is  a crucial step in the effective design of pay systems. The more secret the pay system the more ineffective it will be.

This is simply because employees are not necessarily concerned about what they get paid but with how their pay decision was made. They judge the “fairness”, the “appropriateness” and the “simplicity” the pay system more than anything else.

Researchers have found that there is a direct correlation between pay knowledge & pay satisfaction.The more staff know about how pay is set  and how they can improve their pay level, the happier they are with their pay, job & level. It has been determined that pay processes are often not well understood by employees and managers. Researchers have found that  employees are more satisfied with the amount of their compensation than with the process used to determine it. Also note that pay knowledge and performance management knowledge is positively associated with organizational effectiveness. In many firms, pay is a guarded topic,  but those companies who shared information with their employees found that openness yielded high returns in retention, commitment and trust in management.

Thus “pay secrecy” needs to be eliminated if the system is going to be an effective one. 

Thus the key I have found is open communication about everything about the organization’s pay system.

Forget Internal Equity in Pay Systems!

In a previous Blog posting, titled, “The Two Main Pillars of Compensation Systems” I had introduced readers to the concept of internal equity as one of the main structural pillars of a Pay System.

In this essay, I will expound on the concept that all traditional methods of achieving internal equity are filled with practical challenges. As such, these methodological frameworks languish quite often under the throes of disrepair. Not uncommonly one finds total frustration and anger from internal stakeholders about these programs. Thus, in my opinion, as is the opinion of a majority of professionals in the modern pay management field, that the only way there is to achieve “internal equity” is to base it on the market value of positions and jobs that are required in an organization to achieve strategic and operational objectives (Market Pricing).

The overall structural and theoretical objective of any base pay system has been to achieve both internal and external equity. For achieving the “internal equity” objective the normal methodology used is what is called classification. The science of classification is called taxonomy. This is how taxonomy is defined in Wikipedia:

The branch of science concerned with classification, esp. of organisms;  systematics.

• the classification of something, esp. organisms : the taxonomy of these fossils.

• a scheme of classification : a taxonomy of smells.

Thus one can see the logic of the use of this science in pay systems. What pay systems attempt to do with the use of taxonomic methodologies is to achieve the grouping of work, functions, duties, tasks, knowledge, skills, abilities and behaviors that are rational and logical from the organization’s point of view (not competencies – more on this on a later blog essay) and from the point of view of achieving the organization’s strategic and operational objectives.

The taxonomic methodologies that have been used are, job/work analysis and job evaluation systems. The desire has been to use systematic methodologies in order to be able to develop and implement an understandable and equitable work/job/level structure.  Various quantitative and qualitative methods have been available and are still available for use to perform job analysis and conduct job evaluations. For job analysis recently many quantitative techniques have been developed. With the advent of wide spread computer technology many of these quantitative structured job analysis techniques are available in a computer-aided format. For job evaluation there are a plethora of techniques and methods available for use. They range from whole job ranking, paired comparisons, classification systems and point factor evaluation systems. With point factor evaluation systems being the apparently the most “objective” and quantified process (I for one doubt this contention).

To me, after years in this field, the effort expended to do all of the above in organizations is a complete waste. This is because of many practical reasons which one encounters in the “real world”.

Here are these reasons:

1. Job analysis and job evaluation systems assume a static organizational state. The organization sets its strategic and operational objectives and then follows work, job and job level analysis. But in reality now more than ever there is no “organizational steady state”. In order to succeed in the modern global competitive world, organizations have to be nibble, flexible and in a constant state of change. Thus static systems such as traditional job analysis and evaluation are not valid anymore. Tell a CEO that you want implement these systems with all their associated costs and you are sure find yourself on the street. Gone are the days of the “Hay System”.
2. The basic purpose of job evaluation systems is to create a hierarchy of work – positions, jobs, levels – based on some kind of an internal valuing system. In some job evaluation methods the valuing system is based on “compensable factors”. But, here lies the fallacy. Who decides what the appropriate “compensable factors” are for an organization? And those factors infinitely static, no matter how the organizational environment changes? Who sets this valuing system? HR, consultants, executives? And isn’t “beauty in the eye of the beholder”? Why would an employee, worker or even manager agree with some else’s concept of the value of the work they are doing? Over the years I have seen that this valuing process is a continuous creator of organizational angst. These processes destroy organizational trust and decreases employee morale. And when organizations are trying to achieve positive culture change these bureaucratic methods, which are a legacy of the “industrial age”, are often not appropriate for modern global work environments. There are no “colonial masters” anymore!
3. In theory compensation systems achieve “internal equity” through a properly developed job structure. This job structure is then melded with the external market to create a pay structure. This nomenclature of a pay structure is characterized as grades or salary grades. This nomenclature is also fallacious because, grades are developed by grouping jobs and positions that have been determined (by a pseudo-expert) to be of equal internal value (by the use of a job evaluation methodology) and also are valued equally in the external market into one “box” called a grade. This is completely  “much ado about nothing”. Again this exercise is quite subjective and as such lacks total credibility with the stakeholder public. The external benchmarking is achieved through the use of benchmark jobs. All this sounds complicated and it is. But the value deprived is very suspect. So I say, do away with grades. Grades are a “legacy system”.
4. Finally, did you note that I was using the expression “equal in value”. But what about “comparable value”. More on comparable value in a later blog.

Thus, in conclusion, in my opinion, if one desires some structure and discipline in a base pay process the only way one can achieve “equity” is through a valuing process that the “market” sets for work, jobs, positions and associated levels. More on “market pricing” in a later blog.

The Organizational Pay System – Principle versus Practice – A Wide Chasm

It is my contention, after spending almost forty years in the pay management business, that most organizational pay systems although fairly well intended are mostly mythical beasts that in practice suffer from implementation malaise.

In this piece I am going to lay down the framework of some of the following essays that will follow in this blog further elaborating on the primary premise that has been stated in this essay.

Internal equity is a stated core objective of any pay system. Internal equity means that within the organization the intention is to pay employees according some logic based on the work being done and the value of that work to the specific organization. Well this a valuing system. And as such it is quite subjective and is thus fraught with confusion and mistrust. Systems and structures used to achieve this internal equity principle does not necessarily reduce the subjectivity. Rather these systems are at best rational and cannot be scientific. Human judgement and biases do play a big role in the distortion process. This is one area where the chasm between theory and practice is wide. More on this in a future blog.

The stated pay system principle that is often widely adopted is pay for performance. Although well intentioned, in practice this principle rarely achieves its stated purpose. This is because here again human judgement with all its biases quite often raises its ugly head. More on this in a future blog.

The principle of market competitiveness is an important structural principle of a pay system. But suffice it to say, here again gathering and validating believable market data for their use in pay systems is always questioned in both the positive and negative directions if the data does not say what the recipient wants to hear. More on this in a future blog.

Special interest thinking dominates the pay ethos thus creating all kinds of aberrations in the pay system. Executive Pay, allowances, perks, equity plans, adders, differentials all tend to create a great deal of confusion and controversy and as such widening the chasm between principle and practice. More on this in a future blog.

Another widely sustained principle in pay systems is variable pay, as formulated through bonus and incentive arrangements. Although in principle this is very sound thinking but in practice the system wilts under the pressure of management discretion and the realities of continuing talent management challenges.

Then there is the deep chasm created between the difference between principle and practice of equity compensation. Sharing ownership with managers and employees is a noble principle of effective reward management. But that principle suffers from the vagaries involved in the actual practice and operation of these plans. More on this later also.

Finally, see my essay on structural poverty in the design of the pay systems. Here is another big reason for the huge chasm between principle and practice. A blog on this to follow.

Thus I want to end this introductory essay with a quote from one of favorite books (People Specialists – author Stan Herman – unfortunately the book is out of print). In this quote the author very appropriately explains what one can expect from pay systems after all:

“The point is that there are some things that compensation administration can be expected to do and other things that it cannot. It can help establish a limited and transient orderliness in the way people get paid. It cannot structure a sublime and everlasting order where everybody’s pay is self-evidently equitable and proper in comparison to everybody else’s pay.”

“The quest for a neat correlation between work and reward is a natural one which fits nicely with most people’s idea of the way things ought to be. But the fact that they ought to be does not mean they are. Money value determinations are not the products of fine, dispassionate measurements made in the dust-free, dehumidified atmosphere of a laboratory. Rather they are continually buffeted and rebuffeted in the turbulent environment of the messy outside world, and not merely on a supply and demand basis, either.”

But all is not lost there is very new thinking as to how to really mitigate the chasm and create greater harmony between principle and practice in pay systems. 

There is power point presentation in my website (www.biswasandassociates.com), in the reference page that  explains this new thinking. Those interested can look up the reference.

Yet another post on Wage Theories…

Here are some additional theories….

The Wages Fund Theory –

This theory was developed by Adam Smith (1723-1790). His basic assumption was that wages are paid out of a pre- determined fund of wealth, which lay surplus with wealthy persons – as a result of savings. This fund could be utilized for employing laborers for work.  If the fund were large, wages would be high; if it was small, wages would be reduced to the subsistence level. The demand for labor and the wages that could be paid them were determined by the size of the fund. 

The Surplus Value Theory of Wages – This theory owes its development to Karl Marx (1818-1883). According to this theory, the labor was an article of commerce, which could be purchased on payment of ‘subsistence price.’  The price of any product was determined by the labor time needed for producing it. The laborer was not paid in proportion to the time spent on work, but much less, and the surplus went over, to be utilized for paying other expenses. —Marx himself considered his theory of surplus-value his most important contribution to the progress of economic analysis. It is through this theory that the wide scope of his sociological and historical thought enables him simultaneously to place the capitalist mode of production in his historical context, and to find the root of its inner economic contradictions and its laws of motion in the specific relations of production on which it is based .

The Residual Claimant Theory - §Francis A. Walker (1840-1897) propounded this theory. According to him, there were four factors of production business activity, viz., land, labor, capital and entrepreneurship. Wages represent the amount of value created in the production which remains after payment has been made for all these factors of production. In other words, labor is the residual claimant.

The Marginal Product Theory of Wages- —This theory was developed by Phillips Henry Wicksteed (England) and John Bates Clark (USA). According to this theory, wages are based upon an entrepreneur’s estimate of the value that will probably be produced by the last or marginal worker. In other words, it assumes that wages depend upon the demand for, and supply of, labor. Consequently, workers are paid what they are economically worth. The result is that the employer has a larger share in profit as has not to pay to the non-marginal workers. As long as each additional worker contributes more to the total value than the cost in wages, it pays the employer to continue hiring; where this becomes uneconomic, the employer may resort to superior technology.

 The Subsistence Theory of Wages - —This theory, also known as ‘Iron Law of Wages,” was propounded by David Ricardo (1772-1823). This theory (1817) states that: “The laborers are paid to enable them to subsist and perpetuate the race without increase or diminution.”. —The theory was based on the assumption that if the workers were paid more than subsistence wage, their numbers would increase as they would procreate more; and this would bring down the rate of wages. If the wages fall below the subsistence level, the number of workers would decrease – as many would die of hunger, malnutrition, disease, cold, etc. and many would not marry, when that happened the wage rates would go up. In economics, the subsistence theory of wages states that wages in the long run will tend to the minimum value needed to keep workers alive. The justification for the theory is that when wages are higher, more workers will be produced, and when wages are lower, some workers will die, in each case bringing supply back to a subsistence-level equilibrium. —The subsistence theory of wages is generally attributed to David Ricardo, and plays a large role in Marxist economics. —Most modern economists dismiss the theory, arguing instead that wages in a market economy are determined by marginal productivity.

 The Bargaining Power Theory of Wages - —John Davidson propounded this theory. Under this theory, wages are determined by the relative bargaining power of workers or trade unions and of employers. When a trade union is involved, basic wages, fringe benefits, job differentials and individual differences tend to be determined by the relative strength of the organization and the trade union.

 The Behavioral Theory Of Wages - —Many behavioral scientists – notably industrial psychologists and sociologists like Marsh and Simon, Robert Dubin, Eliot Jacques have presented their views or wages and salaries.

 Briefly such theories are:

 The Employee’s Acceptance of a Wage Level – This type of thinking takes into consideration the factors, which may induce an employee to stay on with a company. The size and prestige of the company, the power of the union, the wages and benefits that the employee receives in proportion to the contribution made by him – all have their impact.

 The Internal Wage Structure – Social norms, traditions, customs prevalent in the organization and psychological pressures on the management, the prestige attached to certain jobs in terms of social status, the need to maintain internal consistency in wages at the higher levels, the ratio of the maximum and minimum wage differentials, and the norms of span of control, and demand for specialized labor all affect the internal wage structure of an organization.

More on the pay theories….

Here is more on the pay theories:

Equity Theory - argues individuals compare the ratio of their outcomes (such as rewards) and inputs (such as effort, performance) with others’ ratios. Those who find their ratio is not equal to those similar to them feel inequity, and take action to reduce it. The strength of motivation is associated with the magnitude of inequity, and the bigger the inequity the greater is the motivation to reduce it. In a compensation context, if employees perceive underpaid, they react  negatively and organization performance will be diminish. Equity theory generally looks at compensation in terms of how much is paid rather than how it is paid. Indeed, we do not have any study that discusses pay mix from an equity theory perspective.

Person- organization fit model states that certain pay characteristics (high pay level, flexible  benefits, individual-based pay, and fixed pay) are more attractive to job candidates. —Pay systems have significant influence on attracting job candidates. —Individuals are risk averse. The greater the relative importance of fixed pay the more effective in attracting job candidates.  The higher the level of total pay the more effective in attracting job candidates.

Prospect theory • Individuals choose risk-averse behavior when the outcomes are framed in terms of potential gains, whereas they choose risk-taking behavior when the outcomes are framed in terms of potential loss. Individual perceptions change their behaviors. People change their attitudes toward risk. Incentives work more effectively when it is framed in terms of positive rewards. Not only the relative importance of incentive pay, but also the market position of total pay, influences employees’ attitudes and organizational performance.   

The theories

Over these many years imminent personalities have presented a rich array of original theoretical thinking on the subject of pay. A serious discourse on the subject of “our pay ethos” cannot really proceed without a review of these many theories that provide us insight into this all encompassing element of our lives.

This post will attempt to give a brief description and view point on each of these many theories. Because any in depth understanding of a subject requires contemplation on the many theoretical framework of thought on the subject under study.

First here is the compendium listing of these various theories: Agency Theory; Efficiency Theory; Expectancy Theory; Equity Theory; Person-Organization Fit Theory; Prospect Theory; Subsistence theory; Wages fund theory; Surplus value theory of wages; Residual claimant theory; Bargaining theory of wages; Marginal productivity theory and Behavioral theories.

Next follows a brief review of each of these theories:

—Agency Theory- addresses how an optimal contract is achieved in situations in which principals delegate work to agents in exchange for rewards. Organization structures and human resource practices are developed to achieve an optimal contract under agency problems. Principals choose either behavior-based contract or outcome-based contract considering the cost involved with the contracts. Outcome-based pay aligns the interests of agents to those of principals. Principals engage agents to perform some service in exchange for rewards. —Agents are self-interested and rational. There is goal conflict between principals and agents. There is difference in the attitudes toward risk between two actors (agents are more risk averse). —Incentive alignment / outcome-based pay encourages the agents to work hard for achieving desired outcomes. The relative importance of incentives affects employee motivation and organization performance . 

Efficiency theory – states —market position of pay matters. Above-market pay level is associated with higher quality of employees, lower turn-over, and greater  effort. Above-market wage is associated with increased efficiency, lower labor cost and employees’ greater efforts to achieve organizational objectives. Above market wage attracts high quality applicants. Individuals compare their pay with external job opportunity. The higher the level of each pay forms  measured in their market positions the better the organization performance. In spite of mixed empirical evidence about the effects on organization level performance efficiency wage theory essentially discusses the higher the market position the better the organization performance.

 

Expectancy Theory - depicts motivation as a multiplicative function of 1) expectancy that is that the probability that effort leads to specific performance. 2) instrumentality is that the probability that the performance leads to specific outcome and then 3) the valence, the value of the specific outcome.

 

—The implication of this theory is that employee compensation system motivates employees most effectively when employees believe “they can do what it takes to earn money and when they value money as a reward”. As long as employees value money, the greater the pay level (valence), the greater is the motivation effects of the compensation system and the better organization performance. Individuals’ subjective estimates on the three perceptions presented above determine the  behavior.

   

More posts on the theories will follow…….. 

 

Why do I use the word “ethos” in this blog?

Since I started writing this blog many people have asked me why I use this word “ethos” in the context of “pay”. So here is the answer.

—Ethos forms the root of ethikos (ἠθικός), meaning “moral, showing moral character”. To the Greeks ancient and modern, the meaning is simply “the state of being”, the inner source, the soul, the mind, and the original essence, that shapes and forms a person or animal (from wikipedia).

  

Ethos, according to The Oxford English Dictionary, is defined as “the characteristic spirit, prevalent tone of sentiment, of a people or community. Originally the word has its roots in the Greek word ‘etho‘ or “to be accustomed to.”  It refers to accepted standards, rather than what is more modernly thought of as character unique to a certain individual. The word also means  ‘’a habitual gathering place.” A place where one might gather often, the opportunity for developing communal or common values. These types of values are those which are established in the meaning of ethos.

Thus I find the word appropriate in the pay context. Why, because —pay in our lives is all encompassing. —It affects our economic, sociological, cultural, environmental,  psychological, familial, physiological, emotional and spiritual lives and more. Thus understanding the concept of pay and how to manage the administration of pay systems requires an understanding of the words used, the theories, the issues, the principles – the context – the ethos! — For our livelihoods we are loyal/disloyal, committed/not committed, respectful/disrespectful, dedicated/not dedicated, motivated/not motivated and on and on. Every single human emotion. —It almost touches our souls.  Thus our Ethos!  Thus the use of the word!  

 

The concept of “paycheck” loyalty

More so than anytime before, I see workers around the world are more committed and loyal to the paycheck than to the “joy of work”. 

What do I mean,committed to the paycheck. Workers more than ever focus on protecting their income source than on doing what they are most passionate about. Workers visualize their efforts at work directly on doing what is necessary to stay employed. They tow the line and do not  speak their minds. Even if they speak they say what their bosses want to hear. They switch allegiances as the “wind blows”. Their focus is short-term employment. Risks are avoided in the workplace. Compliance is exhibited readily as opposed to expressing opinions creatively and freely. They demonstrate loyalty to their immediate bosses not necessarily with genuine regard but with an eye to secure their paychecks. As someone just told me the other day, “I feel really insecure at work now, I need my paycheck, because I have children to feed, loans to pay. I cannot do or say anything that will jeopardize my income source”. This is what I call “pay check” loyalty.

Employees today have to protect their income source. Therefore, we find in the modern work environment a prevailing attitude of “cya”. The work environments are intense. There is constant concern with, “when I will be axed”. 

In this essay I plan to explore the causes of this observed mind shift and then I would like to offer some concrete mitigation ideas to those who care to listen. 

This comes from my heart which has been molded by being exposed to work environments across the world as an employee and also as someone who has supervised others and unfortunately fired others.

Let me please, at the outset say, that if indeed my hypothesis turns out to be true through some concerted research, then this trend does not bode well for the future of work as it stands today.

But let us now delve into some of the causes of this apparent mind shift.

First, the work climate over the last twenty years has been clouded with rampant lay-offs. We have coined new words to glamorize the act of  firing an employee – right-sizing, down-sizing, realignment, restructuring, re-engineering, early retirement, re-deployment, delayering and on and on. Organizations have and still are disrupting human life at will. This phenomena covers all sectors of the working world around the globe. Countless people across the globe stand in unemployment lines, collecting bare minimum funds just to survive. I for one as a long term Human Resource person have participated in such devastations in many companies I have worked for.

No wonder the modern day worker is now just committed and loyal to their paychecks. Organizational conditions are characterized by feast or famine within very short time periods. You might be all turned on by your company environment today but six months later your job is at risk. Bosses turn over frequently bringing in new styles and their own work acquaintances. I have personally had twenty-eight bosses over a career span of thirty-nine years, that is a “boss ratio” of one boss every seven months. Just contemplate this ratio for a moment and the chaos and havoc it can create to the work environment and the psyche. Remember everyone of them had a different style and a different impression about me and my work abilities. No wonder why me and scores of others are just committed to the paycheck. Because our paycheck have been our  only constant. And as a consequence the modern worker walks on “egg shells”. There is no job security. This is the main reason for the current mind shift to paycheck loyalty. The “joy of work” is a vanishing phenomena.

In most organizations the link between effort and reward is all blurred. Salary increases (within very limited budgets) are distributed quite subjectively. Bonuses have lost their “lines of sight”. Stock options are quite often underwater. The role of unions in protecting “worker rights” has diminished. Executives, mostly in big companies are racking in the big bucks – paying themselves bonuses when the company is in dire conditions. Many an executive has devastated companies and then have walked away with multi-million dollar parachutes – the fat city phenomena prevails. Under these conditions, is it any wonder why the average employee is just loyal and committed to their paychecks? I think a law should be passed if a CEO or CFO lays-off more than ten percent of their workforce in a year, then at the end of that exercise they have to also loose their jobs also – here is a wild idea to ponder! The ratio of compensation between the highest paid executive and lowest paid worker is astronomical. There is absolutely no logic  in the concept of the worth of a job done – it is not necessarily based on economic worth or contribution to organizational success. In fact, in reality there seems to be an inverse relationship.No wonder the average worker’s mind shift has gravitated to paycheck loyalty. Can anybody blame the average worker?

Now with the ever changing landscape life-time careers are a thing of the past. With ever changing technology, with global competition, with the speed of everything. and then with the advent of two-earner families  it is hard to stay put in a job. Gone are the days of my father who remained employed at one place for over forty years. In contrast I have had twelve employers. Let me tell I have not been job hopper. I have had to job hopper out of necessity, because some of the companies, although large do not exist anymore. So why would not the average worker be loyal to the paycheck only. That is current reality.

So what does one do to survive. Here are some tips:

1. Develop career self-sufficiency – develop your own long-term career plan and then stick to it like a hawk, never deterred from your own goals

2. Engage in life long learning – always be the most knowledgeable. With real genuine knowledge you will become indispensable

3. Invest in yourself – you are your main asset. Do not expect anybody to take care of you. And remember “YOU” are number one!

4. Do not ever miss the “home runs” – the joy of family and your the celebration of your personal life for the sake of work. Just like me do not waste your life away at the work place, it will not get you anywhere. Spend time with your loved ones.

5. Do not put into the employment exchange more than you expect to get back. The scale always will be unfavorably balanced against you. Your inputs always will be higher than what you get back. Be loyal to yourself and your loved ones and not to the organization which has temporarily engaged you. 

6. Do not have a “love affair”  with your employing organization. I can think about many other things to be passionate about.

7. And finally, understand your success does not necessarily depend on your intelligence, hard work and work conscientiousness. It also depends on “practical intelligence” and a great deal of luck. If you have not done so  please read Malcolm Gladwell’s latest book , “Outliers”. He very interestingly describes what is actually behind the success of apparent successful people.

And above all enjoy life. You really do not know what is going to happen to you tomorrow. Who knows what is written in your destiny!