Chapters 9 and 10 by wuyunqing


									                         Chapters 9 and 10
                    Designing Reward Systems/
                 Rewarding Performance and Change

Chapter Objectives

Chapters 9 and 10 focus on the reward systems of b2change organizations and
complete our discussion of the designing process in the Built to Change Model.

By the end of these chapters, the reader should be able to discuss:

           what types of rewards are best suited to changeable organizations
           the characteristics of reward system processes that support b2change
           how reward systems integrate with information and measurement
            systems, performance management systems, and structure.

Built to Change Strategy: Make Reward Practices Transparent
Built to Change Strategy: Link Rewards to Skills, Knowledge, and Organizational

Reward systems are one of the most important levers for change and strategy
implementation. In these two built to change strategies, we reiterate our commitment
to transparency. To the extent that the organization’s reward systems principles and
practices are available and seen by everyone, the notion of motivation and the
linkages between performance and pay will be cleaner. The strategy of linking
rewards to skills, knowledge, and performance is not new, but takes on increasing
importance in a b2change organization. In an organization that must address both
current performance and change, the flexibility provided by this reward system
principle is critical.

Chapter Outlines

            Chapter 9 Outline                                  Chapter 10 Outline
1. Motivation and Rewards                          1. Seniority-Based Rewards
        Expectancy Theory                         2. Merit-Pay Plans
        Reward Attractiveness                     3. Bonuses
2. Rewards and Performance                                  The Impact of Bonuses
        The Impact of Goals on                             Design Keys
            Motivation                     4. Profit Sharing
         Job Satisfaction, Performance,   5. Stock Ownership
            and Change                              The Impact of Stock
         Satisfaction and                          Support for Change
            Organizational Performance     6. Person-Based Pay
3. Organization Structure and Rewards      7. Egalitarian Perquisites
         How Job Design and Structure     8. Rewards for Risk Taking and
            Affect Rewards                 Innovation
         How Reward System Designs        9. Dealing with Failure
            Affect Structure and           10. Conclusion
         The Impact of Rewards on
4. Organizational Identity and Rewards
5. Strategic Intent and Rewards
6. Conclusion

Chapter Comments

      The primary purpose of Chapter 9 is to review the research on reward systems
      design and how they can support change, and integrate with other elements of
      designing and other core processes in the Built to Change Model.

      This chapter is easily summed up by the Built to Change Strategy that
      introduces the chapter – good reward system designs are transparent.

      In contrast to Chapter 9, the chapter on rewarding performance and change
      describes why some types of rewards – promotions, seniority-based rewards –
      do not support a b2change philosophy. In contrast, the chapter describes in
      some detail when some rewards integrate well and support b2change principles
      and when they don’t. The reader should take away the very real concern that
      finding the right mix of rewards is not governed so much by formulas but by
      choices of structure, human resource strategy, leadership brand, information
      and measurement system properties, and, of course, strategic intent and

      In general, however, the best rewards in b2change organizations are contingent
      on skills, knowledge, and performance.

      We thought one of the more interesting implications of the discussion of
      reward systems and types of rewards was the section on rewarding innovation
      and risk taking. As we pass through the mid-2000’s, this is a particularly
       relevant section given the current emphasis on growth over efficiency. But it’s
       also important to temper any interest in the relevancy of this section with our
       firm belief that b2change organizations are not likely to be very fashionable.
       They are likely to be very good performers over the long run as opposed to
       mercurial performers with fantastic performance followed by dismal results.


Overall, a reward system needs to attract, retain, and motivate individuals who are
capable of developing and implementing a strategic intent. One implication of this is
if strategy changes, the reward system needs to be examined and most likely will have
to be altered. It also means that if the reward system can be adjusted to encourage
behaviors that support a new strategy, it can serve as a lever for change. It can create
an organization that is motivated to change and can push the skills and capabilities of
the organization in a direction that supports change. The inescapable conclusion,
therefore, is that organizations that wish to be high performance and built to change
need to employ significantly different reward systems than the ones commonly used
in large organizations.
         B2change organizations need reward systems that motivate performance,
reward change, and encourage the development of individual and organizational
capabilities and competencies. Paying the person instead of the job and using variable
pay and stock are perhaps the most powerful changes an organization can make in
moving its reward system toward one that supports performance and change.
Decreasing the rewards for seniority and hierarchical position are important and
desirable positives, but they are not likely to be as powerful as rethinking how the
system should reward individuals for their skills and how it should reward
         Of all the changes we have discussed, the most profound is the shift in what
the organization considers its basic building block—away from the job and toward the
individual. Getting rid of job descriptions, which we advocated earlier in the book, is
one step toward reducing the importance of fixed jobs. However, when organizations
make the leap to rewarding individuals for their skills and knowledge, they have done
something even more significant. It is the logical approach to use when an
organization adopts the b2change approach and develops person descriptions and
human capital management approaches that focus on an organization’s competencies
and capabilities.

To top