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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

Everything has been delivered. 10 Bugatti Centodieci are already in the hands of the owners

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Everything has been delivered.  10 Bugatti Centodieci are already in the hands of the owners

OAll Bugatti Centodieci have been delivered, the Molsheim-based brand said on Monday. Cristiano Ronaldo received the number 07 in October this year. and Bugatti has now revealed that the latest unit – #10 – is already in the possession of its owner.

“The Centodieci combines all the values ​​of the Bugatti brand in an extraordinary package: rarity, innovation, heritage, craftsmanship and unrivaled performance. The production batch of 10 units was so in demand by our customers that it was sold before the Centodieci. was even officially presented,” said Christophe Piochon, president of Bugatti.

This latest example is finished in Quartz White with carbon fiber trim on the bottom and matte grilles. The brake calipers are painted in Light Blue Sport, as is the logo on the rear that refers to the EB110, the iconic Bugatti model that inspired this Centodieci. Inside, the predominant color is also blue, as you can see in the images above.

This block is powered by the same block as the other nine instances. The 8.0-liter W16 with four turbines is capable of developing 1600 hp. In terms of performance, this allows the Centodieci to hit 100 km/h in just 2.4 seconds and reach a top speed of 380 km/h.

Recall that each unit costs the owners eight million euros before taxes.

Read also: We already know when the Bugatti Centodieci fell into the hands of Ronaldo.

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Economy

The first Dacia hybrid. “The cheapest hybrid family on the market”

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The first Dacia hybrid.  "The cheapest hybrid family on the market"

BUT Dacia revealed this Monday that the hybrid engine has been available since March on the Jogger, the Romanian brand’s model known to be available with a seven-seat variant.

The Jogger Hybrid 140, Dacia’s first hybrid, will hit dealerships in March, but customers can expect and order it as early as January.

The price has been revealed by Dacia and since it’s only available in the seven-seater SL Extreme, it starts at €28,800. The brand claims it is “the most affordable hybrid family car on the market.”

Available in six existing colors to celebrate the launch of this hybrid, there will be a slate gray version, as you can see in the images above.

Equipped with a 1.6 liter four-cylinder petrol engine with 90 hp, the Jogger is also powered by two electric motors (a 50 hp engine and a high-voltage starter-generator). The total power is 140 horsepower. The electric transmission is automatic, four-speed, connected to an internal combustion engine, and two speeds are connected to an electric motor. This combined technology was possible, according to Dacia, only due to the lack of clutch.

Combined with the energy recovery levels of the 1.2kWh (230V) battery pack and the efficiency of the automatic transmission, regenerative braking delivers all-electric traction on 80% of urban journeys and saves up to 40% of fuel compared to a combustion engine vehicle.

Read also: Dual-fuel Dacia Jogger Eco-G. We tried 5 seater and LPG…

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Economy

See how Tesla tests its electric Semi truck in the worst-case scenarios

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Tesla Semi camião elétrico testes

Tesla has finally been able to bring its long-awaited Semi to market. This electric truck promises to revolutionize transportation and bring all the unique characteristics of this type of electric vehicle to this class of vehicles.

Now that the first units have been delivered, there is hope that they will finally be mass-produced and reach more transport companies. With so many promises to be kept, a new video is now emerging showing Tesla testing its Semi truck under worst-case scenarios.


Tesla Semi is already on the market

Like all Tesla electric vehicles, Semi follows the same line of creating a unique design associated with a platform with the most modern technology available. The proof is in what was presented to the public and surprised most people.

To prove the quality of this new proposal, Tesla published in your LinkedIn account new video. In it, he reveals some of the testing he's done to determine the strength and quality of the Semi's design and its (potential) durability.

Tests to prove its durability

It has been revealed that the Tesla electric truck is subjected to numerous tests and its application in the worst scenarios that drivers may face. It doesn't stop at the ruggedness of the Semi's designs, but goes further and focuses on the motors and batteries themselves.

This is the proof that many have been waiting for to ensure that this new proposal is not limited to a lot of autonomy. Its resistance is great and will provide greater durability, further enhancing the Semi's value and performance.

high quality electric truck

Tesla has already showcased the Semi's quality with a video showing its truck driving roughly 500 miles on just one charge. The big news here is that he managed to make this long journey with a maximum load of about 37 tons.

Now Tesla remains to widely place the Semi on the market. At the moment, only a few companies have access to this new product, with a very long list of pending deliveries, who want to start mass-using this electric truck offering.

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