The SIXTH Commandment

Setting Standards; Rewarding Performance

Reward individual performance that exceeds agreed upon standards.

Performance above the perfunctory level is a discretionary matter for each employee. Most people have alternative, off-the-job ways of utilizing excess energy or talent. Channeling such excess into activity beneficial to the business requires a tailored approach to each individual. A manager must first ensure that there is an understanding of the minimum results to be achieved. Then, for performance above the minimums, forms of compensation important to the performer—or in some cases, teams of performers—must be used.

Commandment One spoke to the importance of consistency among the primary participants in a new enterprise. Commandment Five suggested action to promulgate a conscious value orientation throughout an organization as it expands, recognizing full well that diversity will increase with success and size. Commandment Six calls for a sharp break with the past in that it admonishes the builders of new companies to do away with general, all-purpose reward systems. People work for many reasons. This has always been the case. But winning bread is not the common denominator it once was. Today’s work force is constructed of an incredible collection of individuals from all walks of life, each more liberated in one way or another than he

or she would have been even ten years ago. Management people must seek to align the efforts of individuals with the vision, mission, and objectives of the organization as a whole. It is folly to think that general profit sharing plans or benefits packages or promotion criteria or a quarterly beer blast or arty pictures in the lobby or Friday-after-work schmoozing are going to stimulate or reinforce desired behavior right across the population of the enterprise. Once again...forms of compensation important to the performer—or in some cases, teams of performers—must be used.

Conventional wisdom suggests that every employee wants to get rich, be promoted into positions of larger responsibility, have his or her medical expenses paid, work in pleasant surroundings, have a nice boss, be fulfilled, and retire with a substantial nest egg. Much of this thinking by corporate pacesetters is unconsciously based on Abraham Maslow’s famous 1940s hierarchy of needs paradigm.

Maslowism: The Biggest Trap of All*

The quest for self-fulfillment borrows its forms of expression from whatever sources are most convenient. Unfortunately, the materials closest to hand have been an odd combination of the psychology of affluence, reinforced by an outlook whose interwoven tenets proclaim: live for the moment, regard the self as a sacred object, be more self-assertive, hold nothing back. Where did those assumptions come from?

Early in the postwar quarter-century, the ideas of “more of everything” and the “primacy of self ” merged in a school of thought that may be called “self ” psychology. Self psychology received its most influential expression in the work of the psychologists Abraham H. Maslow, Carl Rogers, and Erich Fromm. Their thinking spread throughout the culture, with the help of self-help movements such assets and books with titles such as Looking Out for No. 1, How to Be Your Own Best Friend, and Pulling Your Own Strings. In particular, the theories of Maslow ingeniously combine a psychology of affluence with a vision of inner development. In the 1950s, Maslow posited a hierarchy of human needs that has become part of the conventional wisdom of our time. According to the hierarchy, people who are preoccupied with meeting “lower-order needs” for food, shelter, and economic security have little energy left for pursuing the “higher-order needs” of the spirit. Vital energies are released to the search for “self-actualization” only when the lower-order needs have been met. We move up the hierarchy of needs in an orderly fashion, on an escalator of increasing affluence. There is obviously some sense in which human priorities do function according to a hierarchy. When we are sick, all that counts is getting well. When our survival, physical or economic, is threatened, it powerfully concentrates the mind (as Samuel Johnson observed about the prospect of being hanged). But the idea of selfactualization– the highest achievement of which human beings are capable, according to Maslow–presupposes our ascension through various stages of economic well-being and is a peculiarly self-congratulatory philosophy for a materialistic age.

The inability of entrepreneurs to reallocate their time and energy, to manage more and do less, is one of the most common reasons why many young enterprises stall just as they start to succeed. More on this in Commandment Ten. A second step in the sequence of thinking is to establish agreed upon standards of performance with those directly involved. The overwhelming evidence turned up by both academics and practitioners over the years is that people tend to respond to structured expectations.

They need to know—want to know—where is the goal line or fence? What is the name of the game or the shape of the target? How high is up? What are the acceptable minimum results? What do you expect of me? Lest you think these phrases are merely cliches, spend some time chatting with a cross section of employees in a lunchroom or two. Ask about their everyday concerns; listen carefully to their vocabulary. People on the job want to know what is expected of them. As one engineer put it, “I can’t operate in the dark.” The point is that the practice of managing with objectives covered in Commandment Three has to be percolated down through an organization to the individual employee level. Corporate objectives become meaningful when they are translated into what it is that a given man or woman is to achieve in, say, the next thirty, sixty, or ninety days. The third step in the sequence of working with employees is to insure that the reward systems and practices of the enterprise support and reinforce the desired behavior of the individual(s) involved.

Not everybody is driven by money. Dual promotion ladders whereby individuals can advance in status, responsibility and income without moving into managing jobs are becoming more common, especially in higher technology companies. In many phases of science and engineering it’s almost a full-time job today just to keep current. To compound that burden with the additional tasks of getting results through others invites both frustration and, perhaps, failure. Entrepreneurial innovations in organizational design and organizational processes can be as important as technical breakthroughs.