# 8 - Organization Design - Part 3
partners of millpond group, Randi Brenowitz and Tracy Gibbons,
are pleased to send you the current issue of our quarterly electronic
newsletter. millpond group specializes in building collaborative
work environments and the infrastructures to support them, and
This issue is the third and last in our series on Organization
Design. It covers the remaining two of the five important elements
that must be taken into account when doing organization design
work, People and Rewards. You may wish to read or review the first
two issues. You can access them at www.millpondgroup.com/artorgdesign.html
This issue also contains:
this issue, you will find:
A discussion of People and Rewards as elements in organization
A review of the book Innovative Reward Systems for the Changing
Workplace by Thomas B. Wilson
Pointers to additional information on this topic
PEOPLE AND REWARDS: THE GLUE THAT HOLDS IT TOGETHER
PEOPLE element of organization design encompasses all things that
have to do with having the best workforce and ensuring that the
culture of the organization and the contract between workers and
the company is mutually beneficial. It includes how and by what
criteria people are recruited and hired to work at the company,
how they develop and maintain the necessary skills and competencies,
and how they are valued and managed. The key underlying principles
of the People aspect of Organization Design have to do with designing
a system that
"old" way of thinking about people and work emphasized
matching an individual's skills and experience to a particular
job which was clearly defined and specified and relatively static
(think job description). In fast-paced, continuously changing,
high performance organizations, the emphasis must be on finding
the people who not only bring relevant skills, competencies, and
experience but who are also willing and able to apply them in
a variety of situations and projects. Here, flexibility and adaptability
are essential, and people are viewed as resources whose abilities
contribute to the core capabilities and overall performance of
the organization. Compatibility with corporate culture becomes
more important, because an employee's ability to see what needs
to be done and do it in an environment that has less stability
and structure takes on added importance. Under these conditions,
adaptive thinking, seeing and making a path where there was none,
and influencing others are critical success factors-for the individual
and the organization. The "how" of these capabilities
is heavily influenced by unique aspects of company norms. There
is also greater emphasis on leadership at all levels, because
relying on and waiting for direction that comes primarily from
the top slows down organizations. Instead, vision, alignment,
and engagement of stakeholders throughout the organization enable
people to act with more initiative and speed to achieve common,
well understood objectives.
aspects of the contract between employee and organization are
is our experience that getting the Reward System of an organization
to match and support other aspects of the organization design
is the most difficult and challenging part of the process. There
are several reasons for this:
in behavior and results are typically a desired outcome in organization
design efforts, and the new, valued results must first be clearly
communicated and understood prior to making changes in the rewards
system. Therefore, actual modifications to the reward system are
made later in the process and there will likely be period of time
during which a perceived discrepancy between what is being espoused
and being rewarded exists.
is a vast range of combinations of incentives and motivators and
of various individual responses to them. What motivates, interests,
or supports one person may not work for someone else, even if
they're doing essentially the same work. For example, the shift
to a cafeteria approach to the selection of health and other benefits
recognizes this fact. However, we have not figured out how to
comprehend individual variability when it comes to performance
management and compensation.
the fact that different parts of the organizations require different
behaviors and results, most corporations insist that their reward
systems be consistent across the organization. It is difficult
to persuade compensation and benefits organizations to modify
the fundamental processes that feed and trigger the payout of
certain forms of compensation or the underlying assumptions on
which they are built. For example, most compensation systems are
based on individual performance, thus creating both subtle and
overt forms of competition among employees who need to collaborate
with each other to meet the organization's objectives.
if what you have is an organization that needs to rely on collaboration,
involvement, initiative, and synergy in order to achieve it's
objectives and result--and these days, most do--then the reward
system must include, value, and mirror these requirements. Specifically,
it will need to:
closing thoughts on Organization Design: The key here it fit.
It's not enough to get a couple of the elements right, because
this is a system--all the elements need to be designed in concert
with each other in order for it to work well. Paradoxically however,
while tight fit is important, if it's too tight, it will be difficult
to modify the design and system in response to the continuously
emerging need for change. Paying attention to the total design
of the organization (not just its structure) needs to be as important
as paying attention to customer satisfaction or financial results,
for this is the source of organizational capability and effectiveness.
Innovative Reward Systems for the Changing Workplace by Thomas
B. Wilson (McGraw-Hill, Inc., 1995)
today's organizations seek to reduce unnecessary levels of management,
delegate decision-making authority to the lowest possible level,
and create teams with accountability for critical functions, they
are creating conflict with traditional reward systems. Traditional
thinking about reward systems focused on the external marketplace
and what was necessary to be competitive in attracting and retaining
people. In this book, Tom Wilson focuses the reward strategy on
those actions needed to implement a firm's competitive strategy.
defines a reward system as any process within an organization
that encourages, reinforces, or compensates people for taking
a particular set of actions. It may be formal or informal, cash
or non-cash, immediate or delayed. He says that organizations
should develop and implement a behavioral framework for rewards.
This involves rethinking the reward systems that currently exist.
The process entails viewing reward systems as supporters, if not
drivers, of change, and modifying the concept that pay programs
are just an infrastructure to the organization. It goes beyond
making sure that people are getting paid, and includes understanding
the messages that a program sends and the behaviors it reinforces.
This approach also involves establishing a strategy for building
and integrating a set of systems, programs, and practices that
reinforces the behaviors necessary for the implementation of the
introduces the "Reward Smart" model, stating that effective
reward systems are:
- Performance measures and feedback systems need to define what
people should do to contribute to the organization's success.
There needs to be a clear line of sight between the results desired
and the behaviors required to achieve them.
- Rewards need to make people feel valued for their achievements
from their own point of view.
- The desired actions or results need to be within the participants'
control or influence, and attainable through reasonable effort.
- The system needs to be designed and operated in a fashion consistent
with its purpose. Not only should rewards be contingent on the
achievement of desired results, the whole process must be managed
in a cost-effective manner.
- Feedback, reinforcement, and rewards need to be provided as
soon after the achievement and/or behaviors as possible. Wilson
cites data showing that an examination of employee performance
in relation to most annual incentive plans indicates that employees
make a concerted effort to achieve goals toward the end of a performance
then goes on to show how to redesign base pay, variable/contingent
pay, profit sharing/gain sharing, and special recognition programs
in light of the SMART concepts to encourage the collaborative
behaviors needed to serve the customer's needs better than competitors
do. He suggests developing new approaches to performance management,
and gives 10 guidelines for this new approach:
Recognize that there is a problem
2. Reformulate the purpose of the performance management process
3. Use objectives to focus activities; use goals to reinforce
4. Measure both results and behaviors
5. Provide continuous, real-time feedback
6. Make reinforcement a part of every day
7. Use performance reviews to celebrate and to learn
8. Make review meetings as frequent as necessary
9. Reward results and reinforce behaviors
10. Earn the right to skip annual performance appraisals
addition to introducing the concepts, this book is filled with
revealing case studies of companies that are successfully using
this methodology. Helpful charts and diagrams clarify the core
concepts and techniques. This book can help organizations create
state-of-the-art reward and recognition systems that really work.
Websites and Other Resources we've found about this topic include:
This is the URL for the Association for the Management of Organization
Design, a nonprofit organization that promotes the knowledge and
practice of organization design.
This is the URL for the Minnesota Organization Development Network
that maintains an enormous and comprehensive database about all
things having to do with OD. The only way we've been able to get
to a specific area, however, is through this URL, followed by
clicking on "Library," and then on the specific topic
of interest. There is a lot of information available about compensation
This is the web site for the author of this issue's featured book
This is the web site for Schuster-Zingheim Associates who are
specialists in compensation and reward processes for high-involvement
and high performance organizations.
Lawler, E.E. Strategic pay: Aligning organizational strategies
and pay systems. (1990). San Francisco: Jossey-Bass Publishers.
book looks at the impact of pay on organization strategy and effectiveness.
Lawler is considered to be one of the leading innovators in the
area of pay and reward systems.
Alfie. No contest: The case against competition-why we lose
in our race to win. (1986). Boston: Houghton-Mifflin Company.
is a seminal thinker on the inverse relationship between rewards
of the carrot-and-stick variety and performance. His premise is
that "while manipulating people with incentives seems to
work in the short run, it is a strategy that ultimately fails
and even does lasting harm." He believes that "our workplaces...will
continue to decline until we begin to question our reliance on
a theory of motivation derived from laboratory animals."