By now, most everyone is familiar with the holocracy experiment at Zappos. Whether the idea is ultimately successful (or not) remains to be seen, but it is clear that there is much to figure out about how to organize people to be self-managing.
One of the interesting implications, highlighted in a recent interview that Tony Hsieh gave at Wharton’s 2016 People Analytic conference, is for the topic of compensation. In a holocracy, hierarchy is based on “purpose and not people,” which frees employees to move around the company from role to role. It is possible to resign from or adopt a role or set of roles at any time.
What determines compensation when the foundation of the organization is so fluid?
One idea, representing the current thinking and practice at Zappos, is called badging. As Tony describes it in the interview, “individuals could earn various ‘superpowers’ or badges which would represent the potential they bring to the organization and upon which their compensation would be based.”
The emphasis within this system is to ensure that individuals are motivated to be entrepreneurial, seeking out projects that will benefit the company without worrying about how their compensation might be effected.
Few organizations are likely to adopt a holocracy approach anytime soon, so this issue may be more of a thought experiment for many of us. The question is still an interesting one, even in traditionally managed companies.
Can typical companies leverage “superpowers” of their employees as a basis for compensation?
This may very well be less of an imposing idea when we think of it as social recognition, which provides many of the benefits of a self-managed workforce without the full risk of a holocratic structure. Social recognition among peers empowers employees to catch the “superpowers” or instances of high performance and contribution of their coworkers.
Collections of these moments over time demonstrate an employee’s potential in living up to core values, and the breadth of contributions that employee can make across the organization. Because peer-based social recognition follows contributions and performance instead of roles, it is well suited to this notion of encouraging an entrepreneurial and engaged workforce.
The logical step- if we follow Tony’s view that self-organization and role fluidity are the future of work- is to shift a greater proportion of compensation budgets towards social recognition, which can demonstrate the potential that employees bring to the organization.
What would your compensation look like if based on your superpowers?
As Globoforce’s Vice President of Client Strategy and Consulting, Derek Irvine is an internationally minded management professional with over 20 years of experience helping global companies set a higher ambition for global strategic employee recognition, leading workshops, strategy meetings and industry sessions around the world. He is the co-author of "The Power of Thanks" and his articles on fostering and managing a culture of appreciation through strategic recognition have been published in Businessweek, Workspan and HR Management. Derek splits his time between Dublin and Boston. Follow Derek on Twitter at @DerekIrvine.