american gas association 5-10-07 - final

©FutureSense, Inc.® 2007 1www.futuresense.com 415.453.1514

Pay for Performance:Hype or Reality?

by:

A Presentation Developed by FutureSense, Inc. forThe American Gas Association

Compensation and Benefits Conference

Jim FinkelsteinPresident and CEO


Introduction

Pay for Performance…

OR…HYPE?


Pay for Performance


Linking Rewards to Results

Profit sharing, stock, sales compensation, bonuses,

salary increase programs


Why?

• Reward performance• Drive results• Attract, motivate and retain people

• Engage and excite people• Transform organizations• Change behavior and

attitudes


Contrarian's View

• PAY FOR

PERFORMANCEDOES

NOT WORK


Contrarian's View

Dissecting

Pay for performance

What aspects Of the conventional thinking

Create challenges Or don’t make sense?


Cull the Herd

If you don’t cut the people who aren’t performing, you can’t pay for performance


Mediocrity Breeds Mediocrity

“It takes a lot less time and most people won’t notice the difference until it’s too late.”


Differentiating Among Shades of Grey

Either people do the job

or…

They don’t


Chasm between Executives and Employees

Average CEO pay is now

300 times

typical non-supervisory worker pay

Undermines the relationships between pay and performance


Culture Clash

Differing cultural values systems

either complement or clash

with pay-for-performance philosophies


Cultural Value Systems

Clare Graves/Don Beck

Paul Ray/Sherry

Ruth AndersonBasic Description Primary Concerns

Turquoise --- Holistic Global consciousness & development

Yellow --- Integrative Complexity & adaptability

Green Cultural Creatives

Humanistic Equality & community

Orange Moderns Strategic Autonomy & achievement

Blue Traditionals Ethical Conformity & stability

Red --- Impulsive Dominance & control

Purple --- Mythical Well-being & custom

Beige --- Instinctive Basic survival

Graves/Beck -- value systems in human history as well value systems to come

Ray/Anderson -- three predominant American subcultures today


Culture Clash

What kind of culture do you want to….

Reward

Nourish

Create


Can You Melt My Butter?

Average salary increase for the past 20 years = 4% +/- 2%

Salary increase matrix:

• 80% rated in 3-4 range• 80% in the middle of their range• 80% in the four middle cells• 1-2% differential between cells• Average worker makes $50,000• So 2% = 1000; divide by 24 pay periods and calculate on an after-tax basis


Bonus Levels

Finkelstein’sRules

Too low……used to pay off credit cards

<5% of pay -- insulting10% -- Christmas Bonus15% -- people begin to engage20% -- people begin to make it happen25% -- people enroll others to make it happen!30%+ -- people look through hoops to jump through…


What’s the motivation?

Like being in a movie, workers are actors looking for their motivation

Motivation = improve performance? Survive? Fear? Win? Value system?

Work mostly out of fear and a necessity to survive

Turnover = ~20%/year


Rating Rants and Raves

How to assess: Behavior?Traits?Performance?

criticism vs. you’re wonderful


Win-lose or Win-Win

Does PFP Divide or Unite Employees?

• If hire well and cull the herd, where differentiation is a waste of time and/or impossible, then focus on winning together

• On-off switch for larger rewards with the opportunity for episodic awards based on manager discretion and cultural values

• Smaller companies or companies that behave with a small culture = profit sharing


Goal Setting vs. Doing the Job


Do I Have a Choice?Can we create an environment where people design

compensation programs that suit their motivational profile,life conditions and risk/reward profile?

“Two roads diverged in a yellow wood…”


Eleven Themes

• Cull the herd• Mediocrity breeds mediocrity• Differentiating among shades of grey• Chasm between execs and employees• Culture clash• Can you melt my butter?• What’s the motivation?• Rating rants and raves• Win-lose or win-win

• Goal setting vs. doing the job• Do I have a choice?


What it Means to You

Motivation and Engagement

• To truly motivate and engage your people, you need to understand why they think and act the way they do

• Tap into your organization’s cultural DNA and realize the value of your people



Acquisition and Retention

Given the high cost of turnover, doesn’t it make sense to hire and retain those people that fit your unique organizational culture?



Compensation and Benefits

• Compensation as benchmarking vs. compensation based on value systems

• What if you could create a compensation and benefits program that actually matches your organizational culture?


Questions and Comments

For further information and/or to receive a copy of this presentation email: [email protected]

american gas association 5-10-07 - final

Documents