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Break the link between salary and motivation – Human Resources

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Break the link between salary and motivation - Human Resources

Performance-based pay systems originated in the industrial age and remain in many companies, but there is evidence that in the knowledge age, objectively independent compensation systems can produce better results.

Pohr Jonas Solbach, Klaus Möller, and Franz Wiernsperger, MIT Sloan Management Review

Pay-for-Performance (PFP) systems were invented in the Industrial Age to improve individual performance, and while research shows that this approach is unsuitable for much of the intellectual work currently done in organizations, the practice remains standard.

These systems are stuck in the past for several reasons. First, it is essentially inertia: companies have been using PFP for decades, and the best practices disclosed by compensation consultants are often based on it. In addition, most executives are unaware of PFP studies or dismiss them as unreliable. Finally, abandoning PFP and moving on to designing and implementing a new reward system can seem intimidating given the potential impact on performance and outcomes from poor performance.

However, organizations have the most to lose if they do not go beyond the PFP. We conducted a large-scale experiment with an objectively independent compensation system. The results point to a strong case for leaving PFP behind.

Dysfunctional Elements of PFP Over the past 50 years, scholars such as Edward L. Deci and Jeffrey Pfeffer, and experts such as Alfie Cohn and Daniel H. Pink, have argued that performance-based pay (PPP) is inherently dysfunctional. This is based on two main sources:

1. First, PFP focuses on narrowly defined outcomes, such as the number of sales closed, but ignores how those outcomes are achieved. This introduces the possibility that chance – or worse, reprehensible behavior – is rewarded and that trying to achieve the promised reward undermines other desirable behaviors such as teamwork and collaboration.

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Second, PFP provides extrinsic motivation for financial rewards but ignores powerful and rewarding intrinsic motivators such as joy in the task itself, a sense of contribution and belonging to a team, and personal development. Financial rewards force employees to focus on specific goals and avoid activities that do not directly lead to the achievement of those goals. PFP suppresses intrinsic motivation, leading to compliance at best, and does not fuel the employee’s long-term commitment or identification with the company. In the long run, this reduces overall performance.

Regardless of the dysfunctions it may cause, PFP has its uses. This can lead to superior performance when the job offers few or no opportunities for intrinsic motivation. When work is monotonously simple or volume oriented, extrinsic motivation ensures the concentration of efforts and behavior of workers.

But PFP undermines the performance of work that requires people to explore complex problems, develop creative solutions, and achieve quality outcomes that cannot be fully determined in advance. Also, when performance targets become obsolete, such as when production lines were shut down and sales dropped during the initial phase of the COVID-19 lockdown, PFP loses its motivating power because you cannot realize the promised rewards.

Finding alternatives to pay-per-performance: a case study
Executives at the Hilti Group, a Liechtenstein-based company that offers products and services to the construction industry, have their own doubts about the effectiveness of PFP and that its emphasis on individual results is not in line with the company’s collaborative culture.

The family business employs over 30,000 people, 70% of whom sell their products and services directly to building contractors in 120 countries. Hilti has a decentralized structure and in-country organizations have their own sales departments. As the range and complexity of a company’s product and service portfolio grows, so do the challenges its salespeople face. Initially, they were limited to offering the company’s products to as many contractors as possible in their assigned territories. However, as Hilti fully developed its sales territory, further growth required an increase in the share of contractors. To that end, the company has stepped up personalization and added new digital solutions, but these changes have also led to more complex sales, longer sales cycles, and a solution-driven approach to sales.

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Today, Hilti salespeople are more like consultants. They often specialize in the needs of specific industries and collaborate with peers, engineers, customer service personnel, and team leaders to meet customer needs.

Sales remuneration at Hilti is based on a pay-for-performance system, adapted to local needs through centrally established rules. But PFP’s focus on individual sales volume and productivity is increasingly at odds with the company’s strategy and culture. Therefore, in 2018, Hilti management asked us to propose and test a new sales compensation system that would better suit their needs.

We looked at the company’s market organizations around the world and found a national organization in Eastern Europe that was well placed to scrutinize the intervention associated with the new compensation system. At that time, the country organization’s 190 salespeople received an average of 65% of their salary as a fixed salary and 35% as a variable salary. But there were problems with this system.

Management has spent a lot of time and effort in setting fair and motivating remuneration targets. Longer sales cycles and the team effort required to close deals made it difficult to allocate sales to individual salespeople. In addition, questions about when and how to adjust goals have often been discussed and contested. Despite attempts by management to address these issues through various formulas, winning awards was a chronic problem, often resulting in dissatisfaction among the commercial forces.

The reward system also became overly complex as management sought to use it to manage a growing number of organizational priorities. Many salespeople didn’t understand their payoff or what actions it was supposed to incentivize, making the whole system ineffective as a motivational tool.

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Another problem was that the salespeople resorted to tactics to complete the required sales and earn their monthly bonuses. This behavior diluted the organization’s sales strategy, which was designed to take the time it takes to establish and develop long-term, value-based relationships with customers.

And finally, sellers were unhappy with the volatility of their remuneration. Long sales cycles caused large fluctuations in monthly sales compensation, which sometimes prevented sellers from paying their living expenses.

Read the full article in the August issue (No. 140) of Human Resources.

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Economy

Legacy of Charles III

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A herança de Carlos III

















Perhaps one of the first questions we ask ourselves when a monarch dies is: what will be his condition? Or: how many zeros will there be on a bank statement? Or even: how much are all the items you bought?

Queen Elizabeth II died earlier this month at the age of 96 and, according to the British newspaper The Sunday Times, she was the owner of a personal fortune valued this year at £370 million, about €427 million, “more than five million more than in 2021.” “. Thus King Charles III (his successor) inherited from his mother not only the throne of the United Kingdom, but also a personal fortune “which he would receive without payment of inheritance tax, in the privilege reserved for royal transmissions”. Most of this wealth would go to Charles and the British government would not receive a single pound sterling.
From sovereign to sovereign

According to CNN, in the United Kingdom, inheritance of assets worth more than £325,000, that is, €373,000, is subject to a 40% inheritance tax. However, Carlos III will not have to transfer this amount to the kingdom’s finances thanks to rules approved in 1993, which provide for an exclusive regime for the heir to the crown when he receives the personal assets of the previous monarch. Under these rules, assets transferred from the sovereign or from the sovereign’s spouse to the next monarch are “exempt from inheritance tax”. In addition, the rules set out in the 2013 government memorandum of understanding also ensure “that the monarch has his own personal money and therefore his financial independence from the state.”

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Charles’ estate includes assets such as Balmoral Castle in Scotland (where Elizabeth II died and is a summer retreat for the British royal family); The residence at Sandringham in England becomes the private property of the British monarch and is known as the place where the family usually celebrates the passing year. In addition, Isabella II had a large stock portfolio and a collection of royal stamps valued at £100m, about 115m euros, according to The Times last year. The famous British Crown Jewels, valued at around £3bn (around €3.5m), also automatically passed to his successor.

Charles III also inherited the Duchy of Lancaster – a royal property since the Middle Ages – which brought the British monarch a private income of £24 million, about €27 million, in the last financial year. The Duchy of Lancaster collected the private heritage of British kings for six centuries. According to El País, its main goal is to provide monarchs with a source of income independent of the sovereign subsidy, a budgetary line provided by the state to carry out their official functions. Despite this, with accession to the throne, Charles loses the duchy of Cornwall, which belongs to the eldest son of the British monarch and which brings about 21 million pounds, about 24 million euros, a year.

To all this will be added the personal fortune of Carlos, estimated at about $ 100 million.
According to CNN, Carlos will also receive an annual “sovereign grant” from the British Treasury of 15 per cent of crown asset income, which for 2021-2022 reaches around 100 million euros, with an additional share of more than 34 million euros. million pounds sterling, about 40 million euros, for the reconstruction of Buckingham Palace in London. This sovereign grant is used “to finance the expenses associated with the official representation of the head of state or members of his family”, including staff salaries, maintenance and cleaning of palaces, official travel and receptions.

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In addition, you will also own a portfolio of the Crown Estate – one of the largest real estate empires in Europe – which includes commercial property, including property in prime locations in central London, rural and coastal land across the country and even the waters around England and Wales. .



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Economy

Elon Musk showed a prototype humanoid robot Tesla Optimus

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Tesla robô Optimus Elon Musk protótipo

Creating a robot has been in the plans of Elon Musk for many years and with several plans for its use. Optimus is the most visible face of the company in terms of creating offerings that will be used in its factories as well as in everyday contexts.

A few hours ago, at the Tesla AI Day 2022 event, a company leader spoke about Tesla’s progress in this area. A new robot has been introduced, which shows that we have real proposals that work and help people at any given time.


Elon Musk reveals his next robot

Over the past few years, Tesla has bet on Optimus your interpretation than a robot designed to help in everyday life. Everyone knew it was just an image of what it could be, not yet fully functional. Elon Musk admitted this on the stage of AI Day 2022.

What was shown just a few hours ago puts this robot on a new level. On the stage of this event, the first functional prototype was shown, which paves the way for what is being prepared. Autonomy is already visible, but it was also clear that there was a lot of work to be done.

Working prototype of Optimus

With a price tag that should be under $20,000, the new Optimus was on stage to show what it can already do. He moved by himself, which was the first time he did, and even danced to show his mobility. In terms of dates, this one was created in the last 6 months and Tesla predicts it will be ready in the next few months.

Equipped with a 2.3kWh battery, this prototype is powered by a Tesla SoC and offers both Wi-Fi and LTE connectivity. In terms of software, Elon Musk's company has redesigned its autopilot, redesigning it to work in a new body and environment. Here, too, real models were used to train the system.

Elon Musk's Tesla Optimus robot prototype

Tesla's great attention to detail

This presentation was about the joints of this Tesla robot. The company has created "human-level arms" with 11 degrees of freedom based on six special actuators, as well as "complex mechanisms that allow the arm to adapt to gripping objects."

While it's still far from being a usable and independent offering, it's clear that Tesla has already changed a lot about its robot. Soon there will be many more news that are placing these new elements in the factories of the brand and, who knows, in our homes to help in everyday life.

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Economy

Electricity and gas prices for families to rise this Saturday

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Electricity and gas prices for families to rise this Saturday

Increases in the price of natural gas and electricity for residential consumers in regulated and liberalized markets will come into effect this Saturday, which in some cases will increase the monthly bill by almost 40 euros.

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