Discussions about accountability in an organization sometimes (often?) minimize the impact of pay on performance. In part, this stems from notions popularized in writings such as Daniel Pink's Drive which posit that incentive rewards don't really "work" and that all motivation is really intrinsic. Therefore, if you pay people "fairly," and get out of their way, everything will work out--accountability will kind of take care of itself. I'm oversimplifying, but you get the idea.
The problem with this philosophy is that it provides an incomplete picture and mischaracterizes the role compensation should play in an organization. Pay plays an essential role in creating the "line of sight" needed for a unified financial vision for growing the business to emerge in an organization and is the means of defining the financial partnership a company wants to have with its employees. As a result, compensation should be viewed as a tool to communicate four critical things to members of your workforce: what's important, what's your role, what's expected of you and how you will be rewarded for fulfilling those expectations.
When an employee can connect those four issues with their impact on the company vision, business model and strategy, he or she is much more likely to adopt a stewardship mindset towards shareholder interests. Without that connection, there can be a conflict between the messages articulated verbally about the strategic goals of the company and the ones communicated in the way people are compensated. As a result, accountability can suffer because employees are tugged in a performance direction through their pay that is at odds with the priorities and focus ownership wants them to have.
For example, let's say I'm employed in a business that has a goal to double revenue over the next five years. Let's also assume the only incentive plan I participate in is an annual bonus. Which of those two realities is going to most impact my focus and efforts? Should we simply rely on my intrinsic motivation to make the long-term revenue goal my priority? On the other hand, suppose that in addition to the bonus, I am eligible for a phantom stock plan where my account value rises or falls with the performance of the company. Am I now more or less likely to take ownership of that revenue target? Is it not obvious how the company might be sending a more consistent message with the latter pay approach?
Companies that create continuity between vision, strategy, roles and rewards are simultaneously building accountability into their pay system. This is because when you achieve line of sight, compensation is given appropriate context. It creates a rewards cycle that is consistent with the performance patterns you want your people fulfilling. Operational integrity breeds trust and a sense of fairness. In his book The Speed of Trust, Stephen M.R. Covey makes the case that when trust goes down, speed goes down and costs go up. Conversely, when trust goes up, speed goes up and costs go down. I would add that when trust and speed go up, sustained results also go up.
This outcome occurs when employees see that all strategic goals, designs, purposes and tools are aligned within the company. On the other hand, intrinsic motivation is stifled when employees feel there is organizational incongruity between messaging and practices. Why? Because the trust level goes down.
Line of sight can be informally measured fairly easily. Grab a random group of senior and junior employees and ask them these questions:
- What is the vision of this company? What is it trying to become?
- What is the business model and strategy of the company?
- What is your role in that model and strategy; how do you impact it?
- What's expected of you in your role; how is success defined?
- How are you rewarded if you fulfill those expectations?
Chances are if you ask that question of five different people in your company, you will get five very different responses. This is because most organizations spend very little time talking about and trying to improve line of sight. It's tragic in many ways. Think about it. If you were able to pose those questions to 10 employees within your company, and get consistent, correct answers, what would that say about your culture? Is it not self-evident that accountability would improve and that intrinsic motivators and values would have a higher likelihood of being released in that kind of environment?
In the end, for organizations that have growth ambitions, high accountability is essential. The stewardship mindset that kind of accountability seeks to achieve can't be realized solely through performance management systems and training. It needs the assistance of line of sight and a belief by management that creating it is a high leverage achievement. It will pay dividends of higher focus, consistent execution and sustained results. All of that breeds a culture of confidence that breaths accountability in a natural, unforced way.
To learn more about how to make pay a greater partner of accountability in your organization, tune in to our upcoming webinar entitled: "Compensation Your P&L Statement will Love." Click here to register. Act soon as space is limited.