Pay It Middle: The Balance between Too Much and Too Little Compensation

01 Tuesday Jun 2010

Posted by Paul Kiser in 2020 Enterprise Technologies, Communication, Consulting, Customer Relations, Customer Service, Employee Retention, Human Resources, Lessons of Life, Management Practices, Public Relations, Relationships, Rotary, Science, Social Media Relations, Violence in the Workplace, Women

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Abraham Maslow, Blogs, Compensation, Employment, HR, Management Practices, Maslow's Hierarchy of Needs, New Business World, Pay for Performance, performance reviews, Public Image, Re-Imagine!, Rotary

by Paul Kiser [Twitter: ] [Facebook] [LinkedIn] [Skype: kiserrotary or 775.624.5679]

Yesterday I wrote an article about research that shows that too much compensation actually makes performance worse. A fellow Rotarian (thanks Skip!) sent me a link to a great video by RSA Animate that illustrates the issue and the research. If you haven’t seen it take a look:

Dan Pink: Drive and Purpose YouTube Video

Paul Kiser - CEO 2020 Enterprise Technologies

The article is here: (Mega Executive Pay Leads to Poor Performance)

But the question is why does mega pay negatively impact performance? Here’s my theory.

The Psychology of Making Too Much Money – Barney and the Manna ATM
A man named Barney goes to withdraw $500 from his local ATM. Instead he is given $5,000. When Barney checks his balance it shows that no money was withdrawn from his account. He could go to the bank and let them know that he thinks the ATM has made a mistake but he doesn’t. Initially he is afraid that someone will discover the mistake and take the money away, but no one says anything and eventually Barney’s fear eases. Each week he goes back to the same ATM for another withdrawal and the same thing occurs. He tries other ATM’s, but he learns that it is just this one that gives him money for nothing. Soon he has built a life around getting $5,000 every week from this ATM. His fear has now subsided, but he feels a little guilty, but also a little evil.

One evening Barney is in a rush for the money and pushes a woman out-of-the-way to make his transaction. The woman is irritated but stands to the side while Barney enters in the information. When the money comes out she notices that he received $5,000 but only requested $500. She points this out to him and he denies it. She knows what she saw and she won’t be convinced. Barney offers to give her half of the money and she refuses the offer. She says she is going to tell the bank….What will Barney do to keep his lifestyle?

When examining behavior by executives and managers in the banking crisis of 2007-09, the answer to that question: “What will a man do to keep his lifestyle?” (I’m not being sexist, just accurate) is answered by the unethical business decisions that led to massive financial failures in 2008-09. Pay might purchase a person’s talents for an organization, but at a certain point, too much compensation begins to purchase the person’s ethical compass. Good decision-making is replaced by self-preservation and the future of the business is sacrificed for the financials of the current quarter.

The lesson is that too much compensation becomes a trap that will often lead to unethical decisions. Mega pay not only doesn’t improve performance, it lures executives to the dark side.

Maslow's Hierarchy of Needs

The Psychology of Making Too Little Money – Maslow’s Hierarchy of Needs
The other side of the issue is paying too little. In 1943, a researcher named Abraham Maslow published a paper titled: A Theory of Human Motivation. The work was based on examining successful people and their living situations. From his research he concluded that there is a Hierarchy of Needs that must be met in steps, with each step supporting the next level.

In Maslow’s paper he proposes that humans must meet their basic survival needs that contribute to sustaining life as the base level of life; however, security and safety needs are the next level. All levels above that (Belonging, Esteem, and finally, Self-Actualization) are dependent on the needs of the first two levels being met.

This is the key. Employers that fail to compensate their team to the point of a living wage should expect their staff to be in a constant state of crisis and that means they cannot expect these employees to be creative and innovative in dealing with the common issues that might arise with the customer. An underpaid employee will be in a constant state of personal crisis that will lead to many issues including reliability, focus, and attitude.

The question is how much is a living wage? That takes an individual examination of the job, the market, and the economy of the region. As the video suggests, you should pay enough to take money off the table as an issue.

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Mega Executive Pay Leads to Poorer Performance

31 Monday May 2010

Posted by Paul Kiser in 2020 Enterprise Technologies, Branding, Customer Relations, Human Resources, Management Practices, Public Relations, Re-Imagine!, Rotary, Science, Social Media Relations, Women

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Blogging, Dan Pink, Employee evaluations, Employment, Executive Compensation, Executive Pay, HR, job standards, LinkedIn, Management Practices, MIT, New Business World, performance reviews, Public Image, Publicity, Re-Imagine!, Rotary, Value-added, YouTube

by Paul Kiser [Twitter: ] [Facebook] [LinkedIn] [Skype: kiserrotary or 775.624.5679]

Paul Kiser - CEO 2020 Enterprise Technologies

Mega executive pay and bonuses do not work. Mega executive pay and bonuses do not work. Mega executive pay and bonues do not work. Got it? No? Then watch this RSA Animate video by theRSAorg posted on YouTube featuring Dan Pink discussing pay and motivation:

Dan Pink: Drive and Purpose YouTube Video

In research and the real world the idea that mega pay makes for mega profit has been proven wrong over and over, yet we still have corporate directors handing out millions of dollars to single individuals…even when that person has led the company to failure. Why? Let’s go back to cognitive dissonance.

We are conditioned to believe that the more we pay, the better the quality. That is drilled into us. Value is determined by how much money we pay for a product or service. How could it possibly be different in paying an executive? So when MIT research, or Goldman Sachs, or BP, or Massey Energy, or General Motors , or Washington Mutual, or Merrill Lynch (the list goes on) demonstrate that mega pay does not equal mega performance…or even good performance, then people overlook the evidence and begin to use irrational logic to justify mega executive pay. Earlier in May, Bill Virgin wrote a piece for The News Tribune in Tacoma, WA to justify corporate exec pay where he said:

“Corporate CEOs have employees, labor unions, investors, customers and government regulators to worry about.”

One might think that CEO’s were alone on a white horse fighting off evil with a shiny silver sword according to Mr. Virgin. The fact is that often the workers under the CEO have a much more stressful environment and in some cases lives hang in the balance, so the CEO’s typical responsibilities fail to be a good reason to pay them hundreds of times more than the workers under them.

The surprise is how little is written in support of mega pay for executives. I believe this is due to the people who make the decision (corporate directors) having no reason to adopt executive pay policies that are based in common sense and every reason to maintain the status quo, but they also have no reason to justify their reasons to anyone. Massive pay means the appearance of importance and if you are the person handing out the massive pay you are even more important. From a corporate director’s boardroom chair the investors aren’t revolting and the customers are still buying, and Republicans are still protecting the practice, so there is no issue to discuss publicly.

But the practice has to change. Not only is it ineffective, it is immoral. Many years ago I worked in a retail store and I learned that the corporate CEO was making $4 million per year and each store was only making an average of less than $250,000 net profit per year. That meant that the work of thousands of employees in over 16 stores were dedicated to providing the salary of one person…and I can tell you, he wasn’t worth it.

If you watched the Dan Pink video you’ve learned that human motivation is based on many factors. I think the important thing to remember is that ‘satisfaction‘ is the most fleeting of all our emotions. Money is junk food in the world of motivation and performance. Too much just makes you sick.

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Social Media Book Review: The Zen of Social Media Marketing

10 Monday May 2010

Posted by Paul Kiser in 2020 Enterprise Technologies, Book Review, Branding, Consulting, Customer Relations, Customer Service, Information Technology, Management Practices, Passionate People, Public Relations, Re-Imagine!, Rotary, SEO, Social Interactive Media (SIM), Social Media Relations, Website, Women

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by Paul Kiser
USA PDT [Twitter: ] [Facebook] [LinkedIn] [Skype:kiserrotary or 775.624.5679]

Book Cover

Book: The Zen of Social Media Marketing
Author: Shama Hyder Kabani
Publisher: Benbella Books
Published: April 2010
Audience: Primary: Message professionals involved in organizational internal and external communication. Also, individuals seeking to create a personal brand. Secondary: Seekers of enlightenment regarding Social Media and Professors and Teachers in many fields (e.g.; business, arts, education, communication, etc.)
Rating: (Out of 5*)
- Overall ***** (5-Must Read)
- Content ***** (5)
- Relevancy ***** (5)
- Style **** (4-down to business tone)
- Readability *** (3-read on a Kindle computer download)
- Value***** (5)
Thesis: A presentation of key aspects of Social Media and how it functions with organizational marketing.

Social Interactive Media is a very complex and variable subject. It is unreasonable for anyone to expect one book can adequately cover this topic because the Social Media tools and their use are changing daily. It is akin to asking someone to explain Art in one book….and the request is made after the Renaissance. There is much to discuss and there is still more to come. The reality is that we are still in early childhood of Social Media, but even today it can make or break governments and businesses.

Shama Hyder Kabani

Despite the impossible task the author, Shama Hyder Kabani has not only written a great book on the subject of Social Media, she is offering a solution to the problem of keeping her book relevant by updating and revising the book on the Internet. It is truly a book born in the Social Media era of handling difficult problems with New World solutions.

Teasers

Introduction – Nice comparison between Social Media and the spoon lesson in the movie ‘The Matrix”.
Chapter 1 – a) Learn how to A-C-T using a great B-O-D in Social Media. b) Strangers to Consumers to Clients.
Chapter 2 – a) What is Website 911 EMS? b) What a blog does for your website. c) Relevancy versus Content…or not
Chapter 3 – Use and abuse of Social Media.
Chapter 4 – Facebook, the coffee shop of the Internet. (I love that analogy!)
Chapter 5 – a) Twitter, it’s about the dialogue, not about you. b) What #ff means.
Chapter 6 – LinkedIn, the conference room of the Internet.
Chapter 7 – Video on Internet: a) About, b) How to, c) Why.
Chapter 8 – Social Media meets Corporate Policy.
Chapter 9 – Icing on the Social Media cake.

I discovered new information on Social Media through Shama’s book, but mostly this was a great read because she validated what I have learned, read, and witnessed in my exploration of Social Media. For me, it allows me to say to someone, if you don’t believe me, read the book. The Social Media Doubting Thomas’ need a hard copy book for information to be legitimate and that is what Shama Hyder Kabani provides to the world. She also confirmed for me that age does not equal wisdom in the world of Social Media. My experience has been that the older the Social Media ‘expert’ the more cynical and off-target the information. Shama knows her stuff and people of all ages should sit up and listen….or just leave.

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Social Media 2020: Did Women Legitimize the Social Media?

14 Wednesday Apr 2010

Posted by Paul Kiser in Information Technology, Lessons of Life, Random, Social Interactive Media (SIM), Social Media Relations, Women

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Facebook, Internet, LinkedIn, New Business World, Re-Imagine!, Rotarians, Rotary, Social Media, Social Networking, Tom Peters, Twitter, Women

Here’s a question for you to ponder.

Would Social Interactive Media (SIM) be where it is today if women hadn’t put their stamp of approval by becoming active users?

: Did Women make Social Media acceptable to the World?

I’m not talking about numbers, because 60% of Facebook users are women, so it’s obvious that they have had an important impact in the volume of users, but I’m talking about legitimizing it for everyone else. I don’t want to get into stereotyping, but as George Clooney’s character in Up In the Air said, “It’s faster.”

Consider that, with the exception of having sex, most men need a reason for becoming involved in an activity. Men don’t shopping; they go to a store to purchase. A man may say that he plays golf just for the enjoyment of the game, but don’t let anyone kid you, a man’s golf score can make or break his day.

Women, by contrast, don’t need to have a reason to go to the store or play golf. They can find pleasure in just doing the activity. For a woman, life doesn’t need justification to be enjoyed.

Now look at the Social Media arena. I often find that men are the most phobic when it comes to participating in Social Media. They mistrust and fear it. Often the comment is, “I just don’t understand what the purpose is!” And there lies the stereotyped gender difference. Men need a reason (and they tend to leave their participles dangling.)

Women don’t need a reason. The format of sharing information and ideas is in their comfort zone and that’s all they need. Women are accustomed to be judged by others, so they don’t fear being judged online. Women are also better self-monitors, so they know how to control their emotions when they post and tweet.

I believe that it was the acceptance of Social Media by women that pushed it into the mainstream. Now, men are just trying to keep up…and trying to find a justification, a ‘reason’, to explain why participation in Social Media is important….hmmm…how’s that working out for us, guys?

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