Compensation and the pay-for-performance myth
Successful corporations start with SMART (Specific, Measureable, Achievable, Relevant, Time-Based) objectives and a compensation model that supports these goals. An effective compensation model will be designed to support the corporate philosophy both in its design and the emphasis it puts on key traits of its employees.
The text book, “Compensation, Eleventh Edition” by Milkovich, Newman and Gerhart (2014) gave numerous examples of pay structures with an emphasis towards pay-for-performance and mix-pay models as a trending leader in supporting the changing workforce demographics. To support this theory, I searched for evidence and found that pay-for-performance models were not necessarily the strongest contender for employee satisfaction; but maybe employee satisfaction is not one of the key elements to success for some companies?
The lingering uneasiness with pay-for-performance models led me to research two completely different eras of Santa’s helpers; the craftsman and carpenters of the 1900’s (wooden toys & shoes); and the iPad and iPhone © assembly-person of today (China’s manufacturing workforce). Both were accustomed to long hours filling Santa’s sleigh with toys based upon the corporate goal of the North Pole: Bring toys to all the good little girls and boys across the globe, annually on December 24th. Other than perhaps not being “achievable” the North Pole has a pretty SMART goal for its helpers, but the incentive programs in both the nineteen hundreds and today is lack-luster for those working to bring holiday cheer to children.
The average annual income of “Santa helpers” has not changed drastically in the past 100 years, but the base pay/buying power is drastically different. In 1900, in the United States, the average annual income for a carpenter was $608 per year (nber.org, pg. 492); today the average annual income of an assembly-person in China is $3,930 (averagesalarysurvey.com). Both build the toys the children want (wooden toys-then, and
The text book, “Compensation, Eleventh Edition” by Milkovich, Newman and Gerhart (2014) gave numerous examples of pay structures with an emphasis towards pay-for-performance and mix-pay models as a trending leader in supporting the changing workforce demographics. To support this theory, I searched for evidence and found that pay-for-performance models were not necessarily the strongest contender for employee satisfaction; but maybe employee satisfaction is not one of the key elements to success for some companies?
The lingering uneasiness with pay-for-performance models led me to research two completely different eras of Santa’s helpers; the craftsman and carpenters of the 1900’s (wooden toys & shoes); and the iPad and iPhone © assembly-person of today (China’s manufacturing workforce). Both were accustomed to long hours filling Santa’s sleigh with toys based upon the corporate goal of the North Pole: Bring toys to all the good little girls and boys across the globe, annually on December 24th. Other than perhaps not being “achievable” the North Pole has a pretty SMART goal for its helpers, but the incentive programs in both the nineteen hundreds and today is lack-luster for those working to bring holiday cheer to children.
The average annual income of “Santa helpers” has not changed drastically in the past 100 years, but the base pay/buying power is drastically different. In 1900, in the United States, the average annual income for a carpenter was $608 per year (nber.org, pg. 492); today the average annual income of an assembly-person in China is $3,930 (averagesalarysurvey.com). Both build the toys the children want (wooden toys-then, and
References: Average Salary Survey 2012/2013 for China: http://www.averagesalarysurvey.com/article/average-salary-in-china/15201531.aspx. taken 16DEC2013. Taken from the National Bureau of Economic Research, NBER (out of print volume); “Trends in the American Economy in the Nineteenth Century”, Author/Editor: The Conference on Research in Income and Wealth, Publisher: Princeton University Press, ISBN: 0-870-14180-5, Volume URL: http://www.nber.org/books/unkn60-1, (1960). Excerpt found at: http://www.nber.org/chapters/c2486.pdf, Pg. 492