Jojo runs a business. His revenues are good, but the income varies significantly. One month he wonders if he will be able to survive the slowness of summer; another month he wonders if his bank account can survive the next stampede of customers. And yet, Jojo pays himself the same somewhat conservative salary every month. It’s enough to pay for his food, mortgage, and novels, but not enough for that vintage Eames lounge chair he has always wanted.
However, today he wants to allow himself something extra. The exports to Norway last month earned him twice the amount he makes in Germany. His Chinese customer finally paid the invoice he had already written off. And hurray! After two years of ignoring his marketing, the Americans have now discovered his services too. Jojo thinks this all calls for a little celebration, and a pat on the back. After all, he did all the work, didn’t he? He considers a transfer of a little extra money to his private account, just for once. Maybe he can read his next novel in a new chair.
Why not? He earned it.
OK, Some Extra Money. What Now?
Paying people for work, without destroying their motivation, is one of the most difficult challenges for management. Regrettably, most compensation systems are considered unfair by employees and unscientific by experts. That’s why it would be wise to consider some lesser-known alternatives that are based on real merits instead of imagined performance. So what if Jojo is not a one-person company but a bigger organization? Should things be any different? In many organizations, employees get a steady monthly salary which is conservative enough for the organization to survive and enough for people to pay their bills.
But what if the business climate is favorable and there’s some extra money available? Increasing everyone’s salary is often not an option. You should only do that when you know it is sustainable. Spending the money on improvements in the office is fine, but usually this benefits some workers more than others. And keeping the money in the organization’s bank account is virtually the same as giving it to the business owners.
I believe that creative networkers should be paid what they earn. It is not enough to say that workers aren’t primarily motivated by money (which is true) and that they prefer to pursue a greater purpose (which is also true). “Money doesn’t motivate people” is not a useful answer to the question “How do we pay employees fairly for their work?” Whatever purpose they pursue, there is probably still money involved in making things happen.
Making money is good; making a difference is better; but making money while making a difference beats all.
What people earn is a result of an organization’s interaction with its environment. An organization’s income cannot be fully predicted; therefore, what people earn should be the sum of their (predictable) salaries and any (unpredictable) extras the organization can afford to hand out.
Earnings = salaries + extras
The question now is: How do we determine the extras?
Jurgen Appelo is Europe’s most popular leadership author, listed on Inc.com’s Top 50 Management Experts and 100 Great Leadership Speakers. His latest book Management 3.0 #Workout, full of concrete games, tools, and practices, is available as a FREE pdf, and in paperback, Kindle and ePub versions. Get your copy here: https://www.management30.com/workout
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