Rewards: Control or Energy?

The rewards we have in organizations today are built upon the key fundamentals of yesterday´s views and imperatives - an industrial economy focus for efficiency and production. ´Pay for performance´ is an evolved version of ´piece-rate´ pay systems put in place in the early 1900s with the introduction of production lines and the mechanization of manufacturing. Many different types of pay plans have been created over the years, each with a different twist to address the needs of organizations and people at the time. The evolution continues today as ´pay for knowledge´ or ´pay for competencies´ become more prevalent. Individual knowledge management and intellectual capital have become more common terms in our society to align with a new information economy. In this environment, cultivating human knowledge is the key to success and a more appropriate human resources model is one that taps into a person´s intrinsic or natural drive to create and contribute rather than one that externally controls and motivates for performance 1. There are important implications for the types of rewards that energize people in this new environment. In addition, there are important implications for the approach used to design such rewards.

The Evolution Toward Sustainable Rewards

Besides experiencing great change as we have journeyed into a new economy, the pace of change is much faster today than it was a century ago. As a result, reward plans need to be designed faster and revised more often to keep up with the rate of change. Over the past couple of years, several articles in a variety of business journals have highlighted the difficulty in attracting and retaining talent2 . Given the continued skill shortages expected with the fast approaching retirement of the baby boomer generation, we can count on the market pressures to continue despite recent downturns in the Tech sector. In a tight market, human resources executives have continued to respond to talent shortages by revisiting their compensation plans. Compensation is often the first target for change because it produces a readily visible outcome for the company and its current and potential employees. At the peak of the Dot.com Boom, to keep their company´s compensation competitive, executives were offering more stock options, increased pay scales, concierge services, more flex time, more of just about everything. Following the downturn, the events of September 11, 2001 and the Enron-type scandals, we have seen fewer companies in business; however, those that remain are still asking for sustainable HR programs that encourage the very best to join and stay with them.

The pressure for attracting and retaining talent will continue to build for employers. Although there are more people available for hire today given the downturn, employers are still looking for the ´right´ people and the ´best´ people for their companies. Finding these people has always been and will always be a challenge. What role do rewards play in this environment? What does compensation look like? To answer these questions, we must change the ´lenses´ in our ´rewards glasses´. Unless we see rewards from a different perspective, we will not generate any new approaches to attracting and retaining talent. We might want to start with our thinking and language. What are the fundamental changes that must be made in rewards for organizations and individuals to more effectively operate in an economy that changes more rapidly than it did in the past? What lessons can be learned from the best of reward strategies and approach to design?

To design self-sustaining and meaningful rewards, we propose that you engage the entire organization and other stakeholders using a process called Appreciative Inquiry (AI). Why not engage all your employees -- the ´best and brightest´ minds in your organization -- to co-design your rewards strategy?

The Appreciative Inquiry Philosophy

Appreciative Inquiry is both a process and a philosophy. It represents a frame of mind and a fundamental approach to life that is grounded in the positive, while being a process by which to appreciatively see and co-construct the world. In other words, as people share with each other what they believe and think, they influence each other´s views of the world. Together, people socially construct the worlds they live in creating meaning through social interaction. In an organizational context, as people talk to each other and share their views of the company, their work together, and their compensation plans, they create a shared understanding of the company - fundamentally the company is as they see it. The AI philosophy is a natural fit for designing rewards in a new economy because its key principles reinforce the importance of inclusive participation and sharing of information to create knowledge. AI believes in tapping into the power and energy of the local experts, i.e. anyone who is intimately involved with the organization. The focus of AI is to understand the best of a variety of experiences. The process then guides participants in co-creating an image of the future that through collective willpower becomes reality. It is a powerful process for discovering what works in a system when people are at their best, full of energy, and excited about their work. Once the conditions that made success possible are understood, an infrastructure is created to support the conditions that enhance sustainable success. The AI process creates an image of an attractive future grounded in the best of the past.

Today''s Model For Rewards Creation

Traditional rewards design is typically driven by a problem or a reaction to some pressure. Figure 1 outlines the typical linear approach employed by management, often supported by a consultant. Figure 1

The Traditional Design Model

 Ideally rewards are designed to align people´s behavior and thinking to support the business strategy of the organization. However, we believe the traditional approach to design has been compromised, as it neglects important perspectives from voices other than management, i.e. employees, shareholders, customers and so on. The focus of rewards has become externally motivating someone to do something rather than tapping into someone´s intrinsic or natural drive to contribute and create. Rewards now do more than point the way for people; they become the ultimate goal and to paraphrase Kohn, a bribe4.

In a traditional approach to rewards design, employees may be invited to participate in "focus groups" to validate or comment upon a pre-designed plan. Although management´s intentions may be good, employee focus groups can become no more than a one way selling tool for management rather than being used as an opportunity to understand what is at the core of people´s needs and desires that when tapped into or satisfied can lead to greater alignment with organizational needs.

In today´s society driven by monetary standards, money is an important commodity and necessary part of rewards. We agree that a sufficient level of monetary compensation is required to attract people to an organization and to keep people from being dissatisfied with the compensation exchange equation-fair pay for fair contribution. However, many individuals would also argue that monetary rewards programs are not the ultimate retainers of talent. When we have asked individuals, ´what does being rewarded mean to you?´ they have replied with answers such as:

• a feeling of accomplishment,

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• being acknowledged for a tough project completed successfully,

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• the opportunity to lead a high profile project,

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• the respect received from colleagues for a job well done.

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Tapping into the intrinsic side of rewards and combining that with the extrinsic can create a powerful energy booster for people.

Along with the new work environment, today´s knowledge workers are demanding that the intrinsic side of rewards be more satisfied as more value is placed upon adaptability/flexibility, creativity, need for change, managing of knowledge and information, and appreciation of diversity.

Appreciative Inquiry´s 4D Model: An Alternative Approach for Rewards Design

Appreciative Inquiry is a philosophy and practice that provides an alternate process for co-creating rewards with key stakeholders. Like the workings of a living system, it means getting a bit messy first to evolve a process rather than jumping in with a solution. As shown by the 4D Model5in Figure 2, AI is an evolutionary, cyclical, iterative process rather than a linear, mechanistic one, which is well suited to today´s fast changing work world. We can use the model to guide the overall process to design rewards as well as use it within the overall process to inquire into specific elements of rewards such as bonus plans, benefits, etc.

Figure 2

The Appreciative Inquiry 4D Model

 To illustrate the difference between the 4D model and the one outlined in Figure 1, in an organization experiencing high turnover, management using a Figure 1 model would ask, "How is the rewards program affecting people´s decision to leave? What´s the problem with our current rewards program? What do our people complain most about our rewards program?" In the AI 4D model management would ask, "When we look at all the organizational nutrients we can provide our people, which ones help them grow and progress with us? With respect to rewards, what makes people stay? With respect to rewards, how do we energize and inspire people to contribute and create in this organization? What do people value most about our rewards and recognition programs?" These questions are at the centre of the model as the affirmative topic choice. In conducting an Appreciative Inquiry with respect to rewards, the central focus is to discover what conditions lead to capturing energy and inspiration within people. By understanding these fundamentals, the organization can co-create rewards that support that energy and inspiration.

To illustrate the 4D model in Figure 2, we will work you through an appreciatively-based process used to design a rewards program with one of our oil and gas clients. Through the rest of this article, we will refer to this client in the plural since we were working with several members of the executive team from this firm; and have also incorporated lesson from projects with other clients.

The First Meeting-- The Topic For Inquiry

The client had called us for help in redesigning a compensation plan that they perceived as misaligned with their team-based organizational strategy. They were also concerned about the escalating costs of rewards and its impact on the bottom line. We began our work with the client by asking them to describe what in their current rewards plan supported their team-based strategy. They proceeded to tell us what they were concerned about; in other words, all the problems they saw with their plan. We find that our first meeting with clients tends to begin this way. Problem solving is what we´ve been taught to do in business so that is our typical starting point. However, AI turns the problem solving perspective around and looks at what´s currently working and what it is that you want to have happen. So, we continued to get at the core of the issue by rephrasing our questions and redirecting our client´s focus on the affirmative rather than the negative. Through this process, we established that what our client wanted and needed to inquire about was:

"How do we create a rewards plan that reinforces the need and desire for us to work interdependently and that will support the organization as a sustainable, thriving, living entity?"

As part of our contracting with the client, we insisted on broad participation in the inquiry process. By this we mean that we wanted to include in the inquiry as many as possible employees and other stakeholders of the organization. In order for the different voices and perspectives to be heard, the participants needed to reflect the true diversity of the organization - organizational levels, organizational functions, gender, age, sexual preference, ethnicity, and so forth.

Stage 1 - Discover

In appreciating the client´s reality and what they wished to inquire about, we began the formal AI process by engaging the client´s employees in AI´s first step, the discovery process.

In one-on-one dialogues, individuals discussed their best experiences with respect to being rewarded and recognized when they worked as an interdependent team. An interview protocol was created to guide the discussions; an example is shown in Table 3.

Table 3 - Example of an AI Interview Protocol

Topic Choice: How do we create a rewards plan that reinforces the need and desire for us to work interdependently and that will support the organization as a sustainable, thriving, living entity?

The following is a sample list of questions used for the discovery process:

1. Looking back at your experiences, reflect upon a high point of being part of an interdependent team. A time when you felt energized, valued for your contributions, excited about what you were doing, highly productive, helping the team thrive and create its best in a co-operative setting. An occasion when all your needs were being met: personally, professionally, organizationally, and socially. Describe the story around the moment--what was happening, who was there, and how you felt.

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3. With respect to this experience, how were your contributions recognized? What kind of recognition did you value most and why?

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5. What do you value most about yourself, your relationships, your profession, and the organization in your story?

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7. If given the opportunity, with respect to rewards, what two actions would you take to nurture and release the talent and energy of yourself and your colleagues to create the conditions for people to make their greatest contribution in a sustainable, co-operative and fun organizational system?

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In this example, the discovery process engaged people´s minds and hearts in understanding what created the best experiences for them with respect to rewards and recognition in the past. Themes drawn from the one-on-one dialogues were discussed in larger groups and a comprehensive list was generated to be used as the basis for work to follow. Examples of themes included:

• Clarity around organizational goals and team objectives

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• A spirit of "One for All and All for One"

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• Sense of personal accomplishment within the team - clarity of own role and accountability

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• Meaningful recognition - personalized rather than ´equal´

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Through the discussions of themes and stories told, participants began to create shared meaning around the critical conditions for feeling recognized and rewarded and for creating ongoing company success.

Stage 2 - Dream

Once we discovered more about best experiences and significant stories about rewards, we moved towards dreaming about the possibilities of what could be. The outcome was a co-created image of the future in which people re-created the conditions that had led them to experience the feeling of recognition and reward in the past. At this stage, based on the collection of key themes and quotable quotes from the dialogues, the participants developed ´provocative propositions´ (PP´s) or positive statements describing the future. These statements were written in "present tense, active voice...as if it already is" 6 Examples of provocative propositions created by the participants are contained in Table 4. In many respects, the provocative propositions represent what in today´s terms some organizations call their human resources philosophy. However, the key difference is the approach to the generation of provocative propositions and in how they are stated. Since the PP´s were co-created by including as many members of the organization as possible, they represent shared meaning and encourage commitment. Provocative propositions are not statements representing only management´s view of what a company can afford to do. Rather, they are a common vision and collective willpower of a creative, intelligent, and responsible group of stakeholders.

Table 4 - Sample Provocative Propositions

• We feel nourished and energized by the work we do, the environment in which we work, and the people with whom we work.

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• Leaders not only recognize our individual and team contributions, but they also care deeply about each one of us.

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• We work interdependently across the globe collaborating on assignments, sharing resources, and co-creating with our colleagues, customers and shareholders.

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• Through our day-to-day actions, we build a sustainable and profitable future for this company. We understand our mission and we work together to create products and services that sustain our living and for those around us.

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• We take time to re-energize physically, emotionally, and intellectually and support each other in that goal.
• We recognize each other for our unique contributions to the team.

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• We are a diverse and creative community of professionals who are rewarded for optimizing our strengths to co-create self-sustaining products and services.

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Stage 3 - Design

With a common and collective framework for what might be possible as described in the provocative propositions, the next step in co-creating rewards turned to design. At this stage, the participants defined specific plans for making the PP´s become reality. In doing so, the questions participants considered were: "what plans do we put in place to live up to our propositions? What practices do we promote and adhere to that reflect the spirit and philosophy of our propositions?" Table 5 outlines examples of intrinsic and extrinsic elements of the reward plan they developed along with their recommendations for other essential processes, structures, and practices that needed to be in place to support the rewards plan and the achievement of the provocative propositions.

Table 5 - Design Stage -- Examples of Plans and Practices to support Propositions

Key Elements of Reward Plan

• Team Bonus Plan - Plan based on two tier performance trigger - overall company performance and team contributions to that performance. The overall company results generated a pool of dollars that was divided among teams based on their contributions. Members of the team shared the bonus based on measured established by the team.

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• Broad Based Share Option Plan - All employees participated in the Plan and were awarded a base number of share options. Employees could choose to increase that number (up to 4 times the base amount) by reducing other elements of their compensation package.

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• Market-based salaries - Salaries were established at median rates paid for similar/same positions in comparator companies in the marketplace. All participants agreed that salaries were a ´price of entry´ or ´the ticket to the dance´ and therefore performance was better recognized through team incentives.

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• ´Day of Play´ - one day per month for employees to experiment; that is, create "messes" for learning purposes.

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• Paid sabbaticals or secondments supporting the opportunity for re-generating physical, emotional, and intellectual energy.

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• Flexible office arrangements - employees work where they find it most energizing.

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• Global work teams - network of professionals across the organization who elect to work together on projects without having to be formally assigned.

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• Monetary and non-monetary reward programs that recognize creativity and diverse thinking.

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Recommendations on Processes, Structures, and Practices

Organizational and Team Goal Setting - A participative process be implemented to co-create and continuously review the organization´s mission and goals and to tie those to team goals.

Team Performance Feedback Process - Create a new performance management process that focused on team evaluation rather than individual - perhaps 360 degree process or an appreciative inquiry team ´valuation´ approach.

Leadership Style & Support - Leaders must be trained and willing to share leadership role and manage teams in a participative style. Role of leader becomes coach rather than manager.

Communication Technology - Update the information technology available for communicating with team members and other stakeholders in various locations; make ´real time´ information available for teams to assess and adjust their own performance.

Work Design and Team Structure - Teams must have defined roles and accountabilities based on the work that needs to be accomplished. A clear understanding of roles and accountabilities will help assess team and individual contributions.

For the AI process to be successful in creating rewards, managers must be comfortable relinquishing ´control´ of the design of rewards to participants; and must trust that through the inquiry process participants have understood, valued, and honoured the organization´s circumstances. Of course, management has a responsibility to outline organizational constraints for the team to consider in the process. Fundamentally, managers must believe that the participants who represent all parts of the organization can together create a better rewards plan than the management team could have designed on its own. We have found that when people are given the opportunity and accountability for balancing organizational budgets, shareholders´ needs, and employee desires, they have proudly developed exceptional outcomes. Human beings are proud to be part of something that works and thrives much like a living organism strives to sustain itself.

Stage 4 - Deliver

Once the reward plans and supporting practices have been designed to create the imaged environment, the AI process proceeds to a deliver stage. In other words, it is the "let´s just do it" stage, and a time for delivering on commitments. With our oil and gas client, we established ´delivery teams´ that took responsibility for the larger projects outlined in the design plan, i.e. the new team performance feedback plan or the team bonus plan. Each team was accountable for drawing up a more detailed plan for accomplishing the task set out, enlisting the resources needed, interacting with the other teams, and communicating its progress. Some of the teams used the 4D AI Model to conduct their work.

As is the case with implementation in the traditional rewards design model, the deliver stage in AI is one of the most difficult. To ensure that things happen at the deliver stage, we recommend that participants constantly refer to the provocative propositions developed at the dream stage to test program design and delivery against the image of the future. Participants need to ask themselves, "Are we inviting all stakeholders to participate in important decision making? Do we have diverse teams that respect and recognize each other for their contributions? Through our rewards program, are we providing all the key nutrients to energize people? Are employees taking the time to re-generate their energy physically, emotionally and intellectually?" Living up to the provocative propositions is the responsibility of every individual in the system, not a task of "control" exercised by management. In keeping with this, the deliver stage becomes a subject of discovery in itself. Although the delivery stage is presented as the final stage in the AI model, it becomes the beginning for the next discovery. Like a living system, it is an iterative, adaptive process.

Summary

There is so much more to learn and discover as society continues to rapidly change. The models once used to explain organizations and how people worked are no longer as relevant in a new economy. Leaders are looking for holistic and flexible organizational designs; are in the business of managing knowledge; and recognize that people are the critical resources in organizational success. In this new society, we must use all the ´people power´ we have to co-create organizations in which people can thrive rather than just survive.

The analogy "if it ain´t broke, don´t fix it" no longer applies in the new economy and might well be replaced by "if it works, let it flourish." The Appreciative Inquiry philosophy supports the belief that looking at "what works" when people are at their best allows organizations to understand the conditions for success and then repeat those in what it creates for the future. As an inclusive process that focuses on creating shared meaning, AI can capture the true spirit and heart of recognition and rewards seen and experienced from the individual´s personal perspective.

Further Reading on Appreciative Inquiry

Hammond, Sue Annis, The Thin Book of Appreciative Inquiry, 2^nd Edition, Thin Book Publishing, 1996, ISBN 0-9665373-1-9.

Hammond, Sue Annis and Cathy Royal, Lessons from the Field: Applying Appreciative Inquiry, Practical Press Inc., 1998, ISBN 0-9665373-0-0.

Sorensen, Peter F., Therese F. Yaeger, and David Nicoll, "Appreciative Inquiry 2000: Fad or Important New Focus for OD?" OD Practitioner, Vol. 32, No. 1, 2000, pp. 3-5.

Watkins, Jane M. and Bernard J. Mohr, Appreciative Inquiry: Change at the Speed of Imagination, John Wiley & Sons, Inc., Jossey-Bass/Pfeiffer, 2001, ISBN 0-7879-5179-X

Endnotes:

1For further information on alternative organization models, see our article "From Mechanic to Biologist: Useful Lessons from Natural System to Understand the Future of Organizations and Rewards", WorldatWork Journal, October 2000.

2 Stein, Nicholas, "Winning the War to Keep Top Talent", Fortune, May 29, 2000, pp. 132-138. And Vanscoy, Kayte, "The Hiring Crisis: How to Find, Keep and Motivate Employees in the New Economy - and Steal the Best Ones from Your Competitors", SmartBusinessMag.com, July 2000, pp. 85-97.

3 Weisbord, Marvin, R., Productive Workplaces: Organizing and Managing for Dignity, Meaning, and Community, Jossey-Bass Inc., 1987.

4 Kohn, Alfie, Punished by Rewards, ISBN 0-395-71090-1

5Mann, Ada Jo, "An Appreciative Inquiry Model for Building Partnerships", Case Western Reserve University GEM Initiative, www.geminitiative.org/partnerships.html

6 Royal, Cathy, Ph.D., notes from workshop, "Appreciative Inquiry: Creating Constructive Change," September/October, 1998.