All posts by Terrance Merriman

Rewards for Performance

Incentive pay does not motivate better performance over time.  An interesting hypothesis, don’t you think?  My partner recently posted on his blog regarding this idea and the evidence behind it.

The idea is predicated on research showing that the difference in performance between people who receive incentive pay and those who do not is statistically insignificant.  The writer further probes the stimulus response concept behind Pavlov’s dogs and other experiments; and suggests that incentive pay is nothing more than a dehumanizing stimulus response tool.

My first reaction was to dig in my heels and disagree.  Much of my business education has been focused on incenting better performance.  I’ve experienced what appeared to be a very successful incentive pay and profit sharing system with a previous employer.  But the more I thought about it, the more suspicious I became that the real motivation in that organization was generated by the way people were treated and the extent to which their values, personal mission, and behaviors were shared throughout the organization.

The company had a business philosophy, mission, and set of values that focused on people, whether they were employees, customers, vendors, or the community as a whole.  The employees felt part of something bigger and more important than themselves; they felt they were making a difference in the lives of others.

The business put on a human face, both internally and externally.  Its leadership team shared a philosophy of servant leadership that was demonstrated by the owners and propagated throughout the organization.  The family owners had defined its vision, values, and purpose in a way that focused on filling human needs.  The result of living out this culture within the organization was a team of happy employees, strong vendor relationships, good community relations, and an extremely high level of customer satisfaction.  The company was rewarded with sustained profits even in tough economic times.

Did the incentive pay program make that much difference in the result?  Well, a study was never done, so we don’t really know.  What we do know, at least anecdotally, is that the employees viewed the incentive pay program as more of a reward for the company’s success in achieving its purpose and goals each year than as a program that inspired them to perform better.

In the end I found myself agreeing with the author and my partner, incentive pay does not motivate better performance over time.  So what does this say about the use of incentive pay programs?  My suggestion is that, if you decide to start or continue using them, they be recast as profit-sharing rewards for achieving the company’s goals and purpose, an approach consistent with my business philosophy.

The true lesson?  Make your business a ministry to others.  Keep your organization people centered and servant led.  Maintain high standards and values; develop and maintain integrity and character, and keep your purpose as an organization focused on filling needs.  Take care of your customers, vendors, employees, and communities.  Let the rewards for successfully fulfilling your purpose be shared with the team.

Peace my friends…

Business to Ministry: Why Talk About Performance?

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I’ve alluded to this one already in the last post.  Performance is personal before it is organizational.  Organizations cannot achieve their full potential if their people are not free to achieve their full potential.  No number of good people can overcome poor processes continually; something eventually will break down.  If your organization bridges the gap between business and ministry by taking the steps previously outlined; and if it addresses the needs of its people through techniques such as servant leadership, and manages its processes effectively, you can expect better performance.

If you’re also reading my blog “Better Business Basics”, by now you’re wondering about several ideas; high performance organizations, kingdom building organizations, people centered organizations, servant leadership, and personal performance being just a few, and we’re just barely getting started.  I’ve already begun to demonstrate how these ideas are related, and why.

One premise is that it is possible to build better businesses through better business basics.  In baseball we would be concentrating on fielding, hitting, and running.  In organizations we need to concentrate on planning, organizing, staffing, directing and controlling.  However, drilling even deeper, we need to focus on the human connection in all business basics.  And of course the human connection is at the heart of making your business a ministry.  Working on the premise that performance is personal before it is organizational, in future posts we’ll discuss factors in human potential, barriers to achieving that potential, and what it takes to free people to achieve their highest potential.

Many business people might suggest that being a high performance organization and being a Kingdom building organization are mutually exclusive conditions.  Actually I believe they can be one and the same, because people are the common denominator, the greatest common denominator in both objectives.  Organizations just provide another environment within which people can be about the business of kingdom building.  If people are freed to achieve their highest potential, and if they discern and execute God’s plan for their lives then they are in fact about the business of building God’s Kingdom on Earth.

If that plan includes a vocation and performance consistent with the purpose and principles of the person’s chosen organization or business, then that person can be building simultaneously a high performance organization.  And God’s kingdom is all about people being affirmed, edified, and equipped to live out all of God’s commandments and commissions, in other words to be disciples, ministers and witnesses to His grace and glory throughout the earth.  In many ways being a kingdom building organization is a byproduct of being a high performance organization and vice versa.

However, I believe being a kingdom building organization should be intentional and a part of the purpose that drives the organization.  If the organization is created to be a people-centered, principle-focused, purpose-driven, servant-led, community-friendly, environmentally responsible organization then the remaining key to becoming a kingdom building organization is to live out examples of Christ’s teachings as a natural part of achieving God’s plan and purpose for the business and its people.

Here’s where the challenge begins.  An organization’s leaders must define its structure, processes, plans, foundation, purpose, principles, leadership style, community relationships, and environmental stewardship activities in a way that affirms and edifies people, and upholds Christ’s teachings.  It must then execute all of its defined activities in a way that also affirms and edifies people and upholds Christ’s teachings.  If not, you can’t have a business that reclaims people, communities, and nations for Christ.

It’s not an easy road, but God never promised it would be!

Peace my friends…