Performance: Pay and Promotion

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From the course by University of Pennsylvania

Managing Social and Human Capital

949 ratings

University of Pennsylvania

Managing Social and Human Capital

949 ratings

Course 3 of 6 in the Specialization Business Foundations

People are the most valuable asset of any business, but they are also the most unpredictable, and the most difficult asset to manage. And although managing people well is critical to the health of any organization, most managers don't get the training they need to make good management decisions. Now, award-winning authors and renowned management Professors Mike Useem and Peter Cappelli of the Wharton School have designed this course to introduce you to the key elements of managing people. Based on their popular course at Wharton, this course will teach you how to motivate individual performance and design reward systems, how to design jobs and organize work for high performance, how to make good and timely management decisions, and how to design and change your organization’s architecture. By the end of this course, you'll have developed the skills you need to start motivating, organizing, and rewarding people in your organization so that you can thrive as a business and as a social organization.

From the lesson

Designing and Changing the Organization's Architecture

This module was created to describe the influence of an organization's architecture on management and its team's performance. You'll explore how inequity fosters disparity among employees and can inhibit a company's success. You'll also look at two real-world examples of leaders who tackled problems within their organizational structures to effect change. By the end of this module you will be able to identify key steps in which you can lead change within your organization.

Designing and Changing Architecture19:02

Performance: Pay and Promotion6:52

Organizational Design5:45

David Pottruck and Charles Schwab Example10:09

Managing People15:04

Manager's Template for Human and Social Capital4:23

Meet the Instructors

Michael Useem
Professor of Management and Director of the Center for Leadership and Change Management
The Wharton School
Peter Cappelli
Professor of Management, Director, Center for Human Resources
The Wharton School

Organizational design.

If we want performance, we want to reward people for performance.

If we want performance in our organizational design, we want promotion.

Not just pay to go with the performance that we're expecting.

And arguably the pay and promotion policy at this company glass ceiling.

That 10% quota were not the kind of design elements that led to optimal

action on behalf of this Florida sales team for the company as a whole.

With that being said, we now run into a new problem,

something we also have to manage.

And to get to the problem, I'm going to have you all think for

a moment, even if you've never seen a National Basketball Association game.

I'm going to have you think about what happens on a floor of the NBA or

maybe a college or high school team that you've seen.

But least focus on the National Basketball Association and

the fact that now focusing on pay and not promotion for performance

that NBA players are relatively, we will all say, well compensated.

In recent years a floor has been $500,000 if your uniform,

you never see playing time but you're there at the bench.

Your compensation is half a million dollars a year.

Nobody's going to shed a tear if we say some players are underpaid,

but some players feel underpaid.

Because of a contract they've been locked into or

maybe an agent that wasn't very good.

That is now compared to the metrics we would use to appraise their performance.

The metric an NBA player would use to perform his own performance,

think about the women's league as well.

The underpaid quote under paid players are looking at other

players say on the team or elsewhere.

And they're paid quite a bit more, but the key statistics

points scored, rebounds taken, assist provided.

Would say just statistically look at the numbers,

I'm underpaid compared to Fred Jones over here who had a better agent.

So here's my question with that felt sense of inequity.

And by felt I mean we look at others that we respect to maybe compare ourselves to.

And not a whole lot of other possibilities like your average person out there like

myself.

When it comes to knowing if you're under or even overpaid for that matter.

Question, let's think now about behavior, the topic

here is how organizational architecture can drive behavior or misdirect it.

If you're an underpaid NBA player and

you get on the court, what are you going to do?

This maybe a little bit different from the NBA player whose statistics

from the last season might pretty well into the pay for this season.

My guess is you're thinking in some cases,

the player who is underpaid is going to get out there and

want to show certainly the team management.

The people upstairs, that they're actually worth more than they're getting paid.

Others might think and it's a completely legitimate argument as well,

I'm kind of drawn to them both.

Look if they're going to underpay me, I'm going to underperform.

So if I'm not getting paid with what I'm able to do I'm going to do less.

Either way that goes we got a problem.

The evidence is one of those nice research questions where the answer

is not necessarily easy to forecast.

The evidence goes this way that quote underpaid NBA players

on the court do tend statistically speaking do want to prove to

the team management that they are worthy a better compensation.

How they do that?

They take the ball more often, they shoot more frequently.

Unfortunately, because they've taken the ball more often

than statistically might be appropriate.

They shoot more often for the same reason with that same downside.

They shave about a point off the team score in a given game.

They cost the team about a point.

That's a way of saying as we move to pay and

promotion as a design feature of the organization that we run.

We want people regardless of background, gender, racial identity,

anything you can think of that doesn't relate directly to performance.

Once we move in that direction, lots of evidence says it's a great way to go.

Companies all over the world are moving in that direction as well.

We open up a kind of Pandora's box of the de-motivation that can come with inequity.

And just to now

reflect on the fact that this is a two sided problem in the NBA it has one side.

A wonderful study that look to what happen temporarily when

insurance underwriters had have specific company had to move out of their offices.

Which were allocated according to their performance and seniority

into temporary offices while their original offices were being remodeled.

It's that simple as a rationale for what's happening.

Some of those underwriters ended up in a very big office,

just they have to go somewhere.

Some ended up in a very small office.

And then the question was, over time, do the underwriters change

their underwriting, do they become more or less successful.

Well, an amazing product, you can see it right in front of you right there of

the inequity in the positive sense or in the negative sense.

Those who are suddenly over-rewarded start performing better and

those who are under-rewarded start performing less well.

My guess is most people never thought about that, never said anything about I’m

going to just hold back or I’m going to be really good because I got a large office.

But going back to Behavioral Psychology, Behavioral Economics and

Daniel Coleman and his great book that sums a lot of this up.

One more example of how we need to be in our organizational design.

Mindful of the shortcomings and

the assets on the positive side of how people will behave.

According to our pay for performance, promotion for performance or in this case,

literally the size of the office.

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