Understanding the link between productivity and wages

During the 1950s, 60s, and for part of the 70s, a great deal of work was done to understand the impact of compensation and productivity on the workplace. (Given the union and labor issues facing Apple, Google, and Amazon now, it’s clear that those lessons may not be part of executive training.) I spent a lot of time. time on this topic in college and graduate school, and while running a compensation program at IBM. I also learned that it was inevitable to call your department head an idiot – even if he was fired a few months later as our revenue grew from $750 million to $250 million. dollars while the cost remains the same. I have learned to be more cautious when talking to my boss.

Here are the rules I’ve learned about how compensation and productivity affect each other.

Money doesn’t always motivate

Regardless of which expert you study, one thing that remains constant is that money is a poor motivator. Overpaying, as often happens with CEOs, doesn’t bring in more work, but taking an employee’s money can almost shut them down. So don’t mix with compensation unless people feel they are being underpaid.

Note that I said “feel” — because one way to really be productive is to let employees believe they are being unfairly underpaid. This happened a while ago Google’s effort to reduce wages for employees who move to lower-cost areas. Workers feel they have a contract with the company to pay for what they do. Their position doesn’t change the job they do, so why should their salary change? From the company’s perspective, there is a fallacy that any such cuts are tied to lower demand. Employers like Google often vary salaries by region, but they don’t explain their calculations when hiring. As a result, an employee believes that their pay is related to what they do, not where they do it.

This becomes a problem because there is no point after a hire when a company considers the cost of living (it should) and adjusts wages dynamically to changes in its financial situation. employee main. Once widespread, increases in the cost of living are increasingly rare. And changes in marital status and the birth of children, which can add significant costs to a household, often do not lead to wage adjustments. So a company cuts wages when employees reduce the cost of living – but not increase pay as costs go up – seems to act unfairly, because it is.

Status can push, but be careful

At one place I work, we have a “Chairman’s Club”. The top producers (and their spouses) will be rewarded with an all-expenses-paid trip at the end of the year, and the top earners will work incredible hours to get it. that reward. A year after joining the Presidents Club, I worked hard to win again – only to find that I didn’t qualify because I won the year before. I am very sad that I went from a loyal employee to a former employee within a few weeks.

I once saw a PR firm announce an “awards” program that didn’t guarantee that any employee would win something if the company didn’t do well – pretty much removed the value that the program had. can bring. Awards can promote higher performance, but they create an informal contract between a company and an employee; any changes to reduce the program later may reduce its positive effects.

Better to lay off employees than cut wages

One thing I’ve seen CEOs do over the years is trade layoffs for pay cuts. The problem is that a lot of employees match their expenses with their earnings, so if you reduce their income, they can quickly fall into disrepair. The cuts have a negative impact on all employees, making it harder to reverse the trend in revenue slippage. On the other hand, layoffs only affect certain employees. However, both can damage trust between employees and the company – especially if it appears that senior managers, especially the CEO, are receiving bonuses, financial incentives. or rewards for their actions.

Layoffs cause other problems that can be exacerbated by CEO awards. At Gateway, someone who was fired became a Best Buy buyer – and cut Gateway off as a supplier to the retail chain. HP’s Carly Fiorina is well known for being well compensated for making rounds of layoffs. When she ran for the U.S. Senate in California, she lost — and the votes she lost almost exactly matched our estimates of the number of voting-age employees and families that were lost. waste. Bottom line: the people you fire can become buyers, analysts, reporters or politicians with an agenda to counterattack. So while layoffs may have less immediate impact on productivity than pay cuts, they come with other risks that are harder to measure and can lead to bigger problems later. this.

The role of trade unions

When employees feel abused or mistreated, one way to seek help is with a union. I am not a fan of unions. I have been trained in union vandalism and a lesson that has stuck with me over the years is from Borax strike in 1974. That strike showed how difficult things can get when leadership and unions go to war. Both sides have taken things too far, but this can happen when workers feel they are being abused on a large scale.

Having worked with unions in the past, I know that they can lead to secondary problems. I’ve seen union representatives asking for side payments and “gifts” in exchange for not filing unnecessary and necessary actions. (When I was in a union, my agent sold us out.) I realized that when management abuses employees, unions are the only way for them to restore balance, although in some case they destroyed companies and industries. If they are too successful, a company can fail. Currently, both Apple and Amazon are facing a consolidation push due to the seemingly abusive behavior and focus on compensation of top executives. (This week as I was writing this, a story broke that Amazon has a union organizer Arrested for bringing food to employees; I hope it doesn’t end well for Amazon.) Apple employees are said to be using Android phones to keep their consolidation efforts secret, This may raise concerns about the security of the iPhone while highlighting the extreme distrust of Apple management.

Biggest resource?

Companies often say, “Employees are our greatest resource.” But companies often don’t fully understand that claim and treat employees like devices that are susceptible to replacement. They do not. They are people, and what drives and drives them to work hard has a lot to do with how they perceive their compensation and how their company maintains trust.

If employees are truly the greatest asset, then it would make sense to learn about the impact of compensation on their productivity, maintain their trust, and not treat them as if they were equipment. they will back you up. This is what leaders at Apple, Google, and especially Amazon, need to learn.

Oh, and a reminder for Facebook: happy employees are less likely become a whistleblower.

Copyright © 2022 IDG Communications, Inc.

https://www.computerworld.com/article/3651529/understanding-the-connection-between-productivity-and-pay.html#tk.rss_all Understanding the link between productivity and wages

Fry Electronics Team

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