Rethinking Remuneration in the Era of Collaboration

We’re living in a fast-paced digital age in which companies are striving for greater collaboration and innovation to remain competitive. Research revealed in “The Rise of the Network Leader” by the Corporate Executive Board in 2014 shows that the combination of individual and network performance across the value chain is where companies can gain exponential performance from their people. The research from this best practice insight and technology company suggests that to achieve the optimal level of people performance, rewards need to be allocated on a more socialised basis. ¹

What is ‘Network Contribution?’

The problem with many traditional rewards systems is that they promote individualistic behaviours and therefore, in many cases, internal competition. ‘Network performance’ is defined by the CEB as ‘improving the performance of others and using others’ performance to improve one’s own performance.’ We don’t get work done through traditional hierarchies anymore, but rather through evolving our networks. To foster true collaboration, reward systems need to encourage people to make strong individual contributions, as well as network contributions to maximise their overall ‘enterprise contribution’.

How Do You Reward People on a More Socialised Basis?

The CEB research shows that linking rewards to the attainment of overall group objectives is not the most effective way to achieve the optimal network outcomes from leaders. Instead, it suggests that objectives and rewards need to be:

1. Within a leader’s span of influence,
2. Aligned to internal network goals, and
3. Centred on specific, individual collaborative activities. For example, creating productive personal and employee networks should be a formal part of leader objectives. ²

Using this approach, the leaders who are able to build and enable powerful networks within the organisation, thereby creating conditions for employees to work through and with others to increase productivity, should achieve the highest rewards.

How Do You Measure an Individual’s Network Contribution?

One way is by using Network Analysis tools. Andrew Pitts, Founder and CEO of Australian analytics company “Polinode”, has developed cloud based tools that collect and analyse data from any source including emails, Yammer, Google Hangouts, Chatter, Instant Messages, Twitter, etc. Polinode then complement this objective data with customised employee surveys. The aggregate data is then analysed and insights can be translated into collaborative behaviours in individuals and groups within an organisation. There are over 20 different networking metrics that can be tracked on an ongoing basis.³

When you overlay these network insights with other data points such as gender, age, tenure, remuneration level and job level, increasingly sophisticated insights can be made in these areas:

1. Talent Management: to identify emerging talent, leadership potential and foster better succession planning,
2. Change Management: to more easily identify who the key influencers are,
3. Retention: better predictive capability in employee attrition.

This is second generation HR analytics and it’s exciting. In the future, companies that undertake Network Analytics will be able to benchmark on-target vs. out-performing levels of connectivity. They will use interactive dashboards to measure networking in real time and encourage employees to collaborate.

The Google Model – Linking Rewards to Business Impact

The team at Google is made up of world leaders in innovation and collaboration. Laszlo Bock, SVP of Google’s People Operations team, writes in his book “Work Rules!” that he and Google’s leadership team spent years formulating the optimal pay model to keep the retention rate of top talent as high as possible. Bock says you should pay employees what they’re worth, not for the job they do:

“At Google, there have been situations where one person received a stock award of $US10,000, and another working in the same area received $US1,000,000. The range of rewards at almost any level can easily vary by 300% to 500%, and even then there is plenty of room for outliers.” ⁴

Google has had plenty of instances where people at more ‘junior’ levels have had a far bigger impact on the business than average performers at more ‘senior’ levels. As a result, the company developed a compensation system that recognises the impact on the business across a variety of measures.

The Google compensation system is based on Paretian Distribution or “the 80-20 Rule”, rather than the traditional Bell Curve. Some believe that the Bell Curve is no longer an effective measure for knowledge workers providing services and manipulating bits and bytes. Bill Gates used to say that there were a handful of people at Microsoft who ‘made’ the company and if they left there would be no Microsoft. This is because knowledge workers are more closely tied to a Power Law Distribution or ‘long tail’ of performance which accepts that people are not ‘normally distributed’ as is assumed with the Bell Curve model. ⁵

Conclusion

Organisations and rewards systems are continuing to evolve and adapt to the rapid pace of change in the digital era. What serves as motivation and reward today may not exist in ten years, so in many cases, it will be those leaders who can unleash the real potential of the collective who will reap the rewards. We will watch this space as it develops and look to provide an update on developments in the compensation space early next year.

1. “The Rise of the Network Leader: Reframing Leadership in the New Work Environment” by the CEB, Executive Guidance for 2014. Here’s the link: http://ceb.uberflip.com/i/199263-the-rise-of-the-…

2. “The Rise of the Network Leader: Reframing Leadership in the New Work Environment” by the CEB, Executive Guidance for 2014. Pp. 39-40

3.“A conversation with Gary Hamel: Transformation of Leadership Step-By-Step” by McKinsey, 23rd May 2013. Interview published on YouTube, here’s the link: https://www.youtube.com/watch?v=_mCmecrnLUM

4.“Work Rules!” by Laszlo Bock, published April 2015 by Twelve Publishing, p.53.

5.“Why Your Business Should Never Grade on a Curve for Performance Management” Blog by Kris Duggan, 17 June 2014. Here’s the link: https://blog.betterworks.com/never-grade-on-a-curve/