Incentives as an Act of Mistrust

The heart of a competitive advantage in an organization is a culture of confidence. Such a culture emerges in companies that have developed success patterns to a point of such sustainability that the "flywheel effect" has kicked in, as Jim Collins describes in his book Good to Great. There is momentum and your people know it; they know it because they are in the midst of it--in fact, they are the ones making it happen. Such a business has a competitive advantage because a culture of confidence is not "copyable." It is an outgrowth of having all the human elements working in a unified, passionate fashion within a company. Think Disney. Think Apple. Think any great company.

The best word to describe the mindset of the workforce within organizations that have developed such a culture is stewardship. The dictionary describes a steward as "a person who acts as the surrogate of another or others." In business, it implies that employees act in the best interest of owners; more than that, they do the things ownership would do because they think like owners. They think like owners, in part, because they are treated like owners--not because they necessarily own stock but because they have some kind of stake in the company's success and a shared value system.

Organizations that adopt a stewardship approach to managing their people nurture trust and confidence in their employees by focusing more on desired outcomes and results than methods and behaviors. They communicate standards and values, vision and strategy, roles and expectations. Then they communicate a sense of partnership in the way they share value with those that create value.

Such businesses inherently understand that they can't use incentives as a tool to manipulate behavior or to reinforce methodology. It's not that they ignore those things, rather they recognize that pay is not the way to enforce the spirit of stewardship they want to engender. To use incentives to "force" certain behaviors is the ultimate act of mistrust. It undercuts the core sense of personal responsibility and accountability that a workforce must achieve if the "flywheel effect" is going to be realized. Mistrust erodes a culture of confidence and pay, done improperly, creates mistrust.

To take it one step further, companies that have a culture of confidence don't even think in terms of rewards as incentives. Instead, they set up short and long-term value sharing agreements with their associates and consider their relationship to be a partnership, not employee or employer. Value sharing is about reinforcing outcomes, not forcing behavior. It's about recognizing the contribution of all stakeholders in an organization's success through effectively crafted pay programs. It's about stewardship not just employment.

So, as you consider where you are in your journey towards a future company that is not just good but great, avoid eroding your culture of confidence through any act of mistrust--especially as you build rewards strategies. Instead, use them to reinforce the line of sight you want to create between vision, strategy, roles, expectations and pay.

To learn more about a specific type of value sharing program that will encourage the stewardship mindset just discussed, tune into our next webinar broadcast entitled: What Think Ye of Phantom Stock--Does it Work?

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