“A raise is only a raise for thirty days; after that, it’s just your salary.”
– David Russo, VP of Human Resources at SAS Institute
This is one of my favorite quotes from the book Hidden Value.
It explains why money by itself doesn’t motivate high performance.
Money by itself can only motivate the quest for more money. A raise is
only a raise for thirty days; after that, it’s just your salary.
We are motivated to perform when our work expresses who we are, when the business’ goals are intrinsically meaningful to us, and we feel that we are valued as people, not simply as economic agents.
But, even in startups, financial incentives and HR practices often treat us like economic agents:
“Consider
the implicit values conveyed in the modern management practices adopted
by many companies. Most firms today emphasize, among other things, the
employee’s responsibility for being career resilient, employment at will
and no-fault dismissal, pay for performance, downsizing to cut costs,
and maximizing shareholder value above all else. What is the message any
sentient employee takes from these practices? Pursue what is best for
you, not the firm or the customer, adopt a free-agent mentality, and do
not invest any more in the firm than it is willing to invest in you. The
underlying values are crystal clear, even if they are never expressed
in a formal way. In this sense, arguments by managers that value
statements are irrelevant or inappropriate miss the point: All
organizations have values; the only question is how explicit they are
about them.“And what happens when employees behave in accordance with these
values? First, a rational employee is not likely to exert much effort in
activities beyond what he or she is explicitly rewarded for. A ‘show me
the money’ mood prevails. Second, a smart employee will be constantly
alert for new and better job opportunities in other
organizations—loyalty is for fools. Third, unless cooperation is
explicitly monitored and rewarded, teamwork is viewed as optional… To
resolve some of these problems, management’s job is to design ever more
sophisticated control and incentive systems to ensure that the necessary
teamwork occurs and that the loss of intellectual capital is
minimized.”
The problem isn’t that money is a weak motivator. The problem is that money is a terribly strong motivator. By itself, money motivates the wrong people to do the wrong things in the quest for more money.
This is why Zappos pays employees to leave. This is why Tandem Computers didn’t tell employees their salaries until after they started working. In other words: we don’t pay you to work here—we pay you so you can work here.
Organizing around values, not value
The authors, Charles A. O’Reilly III and Jeffrey Pfeffer,
both from Stanford’s Graduate School of Business, studied how eight
companies, from Men’s Wearhouse to Cisco, ignore the pernicious
assumption that compensation should be the foundation for management
systems:
“First, each of these companies has a clear,
well-articulated set of values that are widely shared and act as the
foundation for the management practices that… provide a basis for the
company’s competitive success. [e.g. Southwest's "Work should be fun… it
can be play… enjoy it."]“Second, each of these organizations has a remarkable degree of
alignment and consistency in the people-centered practices that express
its core values. [e.g. Southwest: "We hire happy people."]“Finally, the senior managers in these firms, not just the founders
or the CEO, are leaders whose primary role is to ensure that the values
are maintained and constantly made real to all of the people who work in
the organization… The senior managers in each of these companies see
their roles not as managing the day-to-day business or even as making
decisions about grand strategy but as setting and reinforcing the
vision, values, and culture of the organization. Dennis Bakke at AES [a
$2B company] claims that he made only two decisions in 1998, one of
which was not to write a book on the company.”
Extraordinary results with ordinary people
The book’s subtitle is “How great companies achieve extraordinary results with ordinary people.”
Every rational company in the world is trying to hire the best people
in the world. And all but one of them will fail at this task. There can
only be one company with the best people. Hiring the best is a failing strategy.
Organizations must be designed to thrive with ordinary people. If
businesses can thrive with the capabilities of ordinary people, they can
also thrive with extraordinary people. Practices like Extreme Programming, that were designed for programmers with ordinary skills, work even better with extraordinary programmers.
Read Hidden Value
for specific recruiting, training, information-sharing, and rewards
practices that aim to exploit the capabilities of ordinary and
extraordinary people alike.
“If people come for money, they will leave for money.”
– James Treybig, CEO of Tandem Computers