Daniel Pink’s “Zen of Compensation” is Anything But

Editor's Note:  I am pleased to feature today's post from guest contributor Howard Risher.

Daniel Pink wants “to get money off the table”.  It’s simple: Ensure internal and external fairness, pay more than average, and use wide-ranging, relevant and hard to game metrics.  Problem solved.

It would be great if the world was as simple as Pink apparently believes.  He contends “Effective organizations compensate people in amounts and in ways that allows individuals to mostly forget about compensation and instead focus on the work itself.”  Apparently it’s only the poorly managed organizations that have trouble with pay issues.

Pink relies heavily on Edward Deci, a prominent psychologist who with Richard Ryan developed the self-determination theory with its emphasis on autonomy, competence and relatedness.  Deci was one of the early critics of extrinsic financial rewards.  This is certainly not to refute the importance of intrinsic motivation – I’m a huge believer – but a great deal of the research involves student experiments.

And that is the underlying problem with Pink’s discussion of pay – he seems oblivious to the fact that for employers, compensation is an ongoing problem with a history and firmly held employee attitudes.  It’s not a brief student experiment or a situation where employees quickly forget how their pay has been managed.  Only start-up companies have the advantage of starting with that clean slate.

Paying more than average should help with recruiting and retention but I am not at all certain how much above market averages is necessary for employees to forget about pay.  Pink states “Higher wages could actually reduce a company’s costs.”  The italics is Pink’s.  I am sure that’s possible but it would have to involve changes beyond the pay increases.  He’s silent on how to accomplish that.  He also states above-average pay offers an “elegant” way to bypass the use of incentives, and eliminate concerns about unfairness.  Wow – if we had only known.

And it is not at all clear how higher salaries eliminate concerns with internal and external fairness.  My experience in discussing pay with executives convinced me some time ago that pay at all levels is a measure of success.  For CEO’s who see the pay of their competitors in proxy statements, pay is clearly on the table.  Plus I am not at all certain that employees are going to believe their pay is above average. 

In a discussion of internal and external equity, Pink refers to “you and Fred”, both auditors with ten years of experience but also recognizes that Fred might have a harder job or contributes more.  Surprisingly perhaps he acknowledges that Fred “deserves a richer deal.”  That’s apparently OK because “several studies have shown that most people don’t have a beef with that”. 

That’s what passes for popular wisdom.  He says nothing about how to confirm or measure their relative contribution or how much richer the deal can be before it triggers cries of discrimination. 

It’s easy to make a few broad-brush statements about fairness and equity.  Everyone no doubt agrees it’s important.  But the challenge is developing and maintaining practices that enable an employer to sustain a sense of equity that is shared across an organization as salaries are managed over time.  Pink does not appear to have a clue.

And last but not least is the value of developing those “wide-ranging, relevant and hard to game metrics”.  That’s been a problem.  I’m glad he solved it.  All we have to do is develop magic metrics relevant to each job.  I know, I don’t appreciate wise remarks either but blame it on Pink.  Employers have been trying for decades to develop those metrics and for many jobs they simply do not exist.

Pink’s broader argument is powerful.  It obviously has found a large audience that is hungry for more effective management practices.  My concern is that they might accept his comments as gospel.

On a website promoting speakers, Daniel Pink’s photo is shown beside the statement, “Bidding adieu to his last "real job" as Al Gore's speechwriter, Dan Pink went freelance to spark a right-brain revolution in the career marketplace.”  He would be more credible if he had experience managing people or a few years working in a reasonably large organization. 

Howard Risher is a private consultant who focuses on pay and performance. His career extends over 40 years and includes years managing consulting practices for two national firms. He recently became the editor of the journal Compensation and Benefits Review. He also has an MBA and Ph.D from the Wharton School of the University of Pennsylvania. Contact him at [email protected].

 

Creative Commons photo "Zen Beach Stones at Home" by Pink Sherbert Photography

Comments

[Jacque Vilet]

Love it Howard. I too have a raised eyebrow when I hear/read some of his "right brain" comments.

[Dan Walter]

Great Article Howard.

It lays out some of the pertinent realities that must fit within a speech writers view of our profession.

As for some details...

"Plus I am not at all certain that employees are going to believe their pay is above average."

As I mentioned in a Compensation Cafe posting earlier this week, it is mathematical impossible for everyone to be "above average." As a country we are generally above average when compared to the world. Maybe that;s what Mr Pink meant (but I doubt it).

[Paul Hebert]

Huzzah! You know where I stand on this Ann - and I'm 1000% (doing similar math as the Lake Wobegone folks) behind this thinking.

Too much academic - not enough application.

Let's see this in action before we declare it gospel. I've said it before and I'll say it again. I'd be happy to compete against a company that followed all of Pink's advice - let me run a few incentives now and then whilst they worry about autonomy, mastery and purpose.

Those are important - but the are not the sum total of levers we need to employ to be competitive and succeed.

And I'll add my normal caveat - "when done correctly."

Cheers.

[E. James (Jim) Brennan]

Well said, Howard.

It's a lot easier to speak persuasively, making obvious and deceptively simplistic generalizations about work, when you've never held a real job where output results were substantial and not simply image. You too can invent the internet. There's never a shortage of snake oil.

[C# MVC Consultant]

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