Debates rage in board rooms, senior management team meetings, and human resources departments as to the appropriate types of compensation packages to provide to employees.
A book written by Daniel Pink titled Drive: The Surprising Truth About What Motivates Us over a decade ago steered much discussion around the preeminence of intrinsic internal motivation within jobs.
He argued that extrinsic compensation can cause negative results within firms as employees focus on and obsess over winning and earning those extrinsic monetary-based rewards at the expense of long-term focus, interpersonal relationships, and good stewardship of the organisation as a whole.
He advocated for companies to focus instead on creating intrinsic environments for staff to feel autonomy in making their own job decisions, the ability to become masterful at their crafts, and foster a sense of purpose in the work done.
But later research by Gerald Ledford, Barry Gerhart, and Meiyu Fang found that extrinsic rewards do not actually kill intrinsic motivation and actually work hand-in-hand with intrinsic motivation.
Optimal compensation structures combine both extrinsic and intrinsic strategies to achieve the best performance from the workers and for the firm. But how should organisations structure the extrinsic components of their compensation motivation?
In the United States, for example, in the Pay Practices and Compensation Strategy survey, Connor Harrison states that a staggering 77 percent of organisations use variable pay incentive systems in their compensation structures.
Types of variable pay programmes include spot bonuses whereby a supervisor notices great performance and awards extra compensation on an ad-hoc basis. Further, individual, group, and organisational bonuses get allocated when pre-set targets are met.
In looking at more than 77,000 workers, researchers Julia Hur, Alice Lee-Yoon, and Ashley Whillans found that the compensation and reward structure within firms holds profound implications for both employees’ professional as well as personal relationships.
Workers within entities with variable pay incentive systems are more likely to spend time socialising with their co-workers at the expense of their friends and family who they then end up spending less time with.
Then throughout the year, incentive system staffers voluntarily also spend a cumulative eight extra days, by totaling up all the additional hours spent, working with both external clients and internal coworkers. However, sadly, the incentive system employees enjoyed the interactions with colleagues and customers far less than non-incentive system employees and viewed exchanges as more contributory rather than emotional bonding.
Incentives shape how workers view all relationships in their lives and then see gains and benefits from all their interpersonal interactions.
Inasmuch, incentive compensation structures put extra internal pressure on Kenyans to work longer hours, which increases stress on already over-worked citizens.
Here in Kenya, we work longer hours per week than much of the world. In a 24/7 Wallstreet survey of mostly industrialised nations, the countries of Denmark, Netherlands, and Norway hold the lowest average working hours per week at between 37 to 38.
Whereas still industrialising countries of Colombia, Costa Rica, Mexico, and South Africa work the longest hours per week at between 45 to 50. But some other less robust publications list Kenyans working per week going as high as 60.
Therefore, as executives of firms in our Republic, let us truly examine whether the decreased happiness employees feel with their interpersonal relationships and the obsession to work even longer hours is truly worth us designing, implementing, and using variable pay incentive systems.
In so doing, we create networks of workers who feel like zombies merely viewing colleagues and clients as transactional necessities rather than fellow soldiers on common organisational strategic set of goals. It increases staff burnout and intention to quit the firm.
Dr Scott may be reached on [email protected] or on Twitter: @ScottProfessor