8. November 2014 / Michal Vallo
I noticed in Agile community and related articles and presentations mentions addressing salaries and remuneration. Money are wanted by to everyone, no wander the topic is becoming increasingly popular. However, I feel that the only purpose of these presentations or blog posts is to attract audience, be it to the speaker or to the blog. They used to be prepared quite superficially, and almost always by people who never did any remuneration decisions. It often shoots to managers, and this is where it gains easy points. It also shoots on rewarding systems, and this is where it gains easy points again. No serious discussion is thereafter possible and final conclusion is always the same:
Hey you, bad manager, you pay us too little!!!
I saw presentation of Christof Braun at Agilia Conference titled Show Me the Money. It was also the one, which was highly attended and which resonates with audience. The presentation is based around ideas of Alfie Kohn. Most of us will agree, that pay is not a motivator, as expressed by W. Edwards Deming. Kohn suggests to pay enough, to put the question of money out of the table. Braun in presentation discuss, how much is enough and who will do this decision. It ends up with conclusion: salaries should be fixed and ideally determined by employees and peers, incentives should be abolished, participation on success of organization should be via bonuses. Well, while I agree with bonuses, with all the rest I simply cannot. And I will explain later why.
One of the fighter against Performance Appraisals is Luis Gonçalves. In his blog he has enough arguments, why performance appraisals are bad – prevailing reason is that it is not easy to measure precisely. And if we can’t measure precisely, it will not be fair, so it is better to abandon it completely. I do not agree with him either. And I will explain later why.
So what is so dangerously bad on this?
Building up knowledge based organization is significantly different than traditional one. Building up Agile organization is even more radical. Do we still have employees? De jure, according to law, or de facto, according to how work is being organized?
In most presentation I see problematic premise – it is manager, who sets up the salary and pay. The objective of presentation is to warn him, or educate him, that if he sets up remuneration wrong, it may have negative consequences on people’s motivation. Is this really true? Is it really manager, who pays the salary?
My experience as manager is quite different. I can’t see anywhere in entire construction the value of work delivered. And this is what makes me scared. The propositions could work well, if precondition, that people deliver higher value than the one they finally receive as pay, is valid. Or better said, much higher value. But is such precondition valid?
Being a manager for decade, and consultant as well, I have my own experience from managing business as manager or owner. As a consultant, I have consulted to tens of organizations. And I must admit, that this precondition is not valid. More than 50% of the teams or organizations I have consulted with, did not make enough value to cover their salary!
It is same while running business. Many people do not create enough value to cover cost they take away as salary. Sometimes, it is temporary, just a bad month, so no problem, in just next one it will be fixed. Many time it is systematic, and value is not there over long period of time, or never. In this situation, some action is clearly demanded.
However, in normal situation I would expect, that people care and are interested to understand their contribution. Honestly, it was rarely the case. On the other hand, all the people expected they will get their pay exactly on pay day and in full, regardless of value created. People got used to get money regardless value is delivered or not. And it is dangerous for the future, both for companies and for society. (In the knowledge-based companies such value is sometimes difficult to measure, but it cannot be excuse). It is generally believed, that company or organization has somewhere hidden printing machine, which will print on demand required money. And it is those bad managers, who pays them so little. Unfortunately, it is mostly not managers, who pays the salary!
There is no such thing as printing machine
So who pays our salary then? In most companies, under normal operation, people create product or service. They deliver it to customers, who pays for them. As soon as money appear on the bank account of the company, they can be used also for payment of salary. It is simple like this. It is customer, who pays our salary! And why many did not noticed yet? In many organization, the value chain is long, that is why it is not clearly visible. So how to achieve salary rise? Talk to the customer! It may be through explanation that his pressure on price has consequences, or it can be through innovation, or optimization.
(to be continued)
Glossary:
W. Edwards Deming – engineer, statistician, professor, author, lecturer, and management consultant
Alfie Kohn – speaker, writer
About author: Michal Vallo helps managers to understand agile techniques, benefit from its adoption to their organizations and consequently radically improve organizational overall performance. He is principal, agile trainer, coach and manager at Aguarra, founding member of Agilia community and organizer of Agilia Conference in Brno and Agilia Budapest Conference.