Personnel Economics: The Economist's View of Human Resources

Monetary incentives are the petri dish where motivation grows in work environments, particularly in sales. Whether the culture that forms is a healthy one or not depends on context. Customers' expectations of service providers are changing. People expect service not just sales. So how do you design an incentive scheme that supports customer service and results in sales?

I don't pretend to know the answers. All I know from my experience as a service designer is that incentives (and remuneration) are factors that someone needs to be thinking about when change is being rolled out.

The paper "Personnel Economics: The Economist's View of Human Resources" provides an overview of HR from an economic perspective. I hope to share enough of it so that you might read the whole piece. Here's the teaser:

Personnel economics drills deeply into the firm to study human resource management practices like compensation, hiring practices, training, and teamwork. Many questions are asked. Why should pay vary across workers within firms--and how "compressed" should pay be within firms? Should firms pay workers for their performance on the job or for their skills or hours of work? How are pay and promotions structured across jobs to induce optimal effort from employees? Why do firms use teams and how are teams used most effectively? How should all these human resource management practices, from incentive pay to teamwork, be combined within firms? Personnel economics offers new tools and new answers to these questions.

The paper theorises on how pay determines culture in its discussion of piece rate pay versus performance pay. It talks about pay conditions that foster team work and cooperation and the trade-offs that they involve. It’s not all about money though, so the paper also considers “hedonic” factors like prestige, recognition, and working conditions. 

It’s easy to measure the output of sales people, but how “service” is measured needs to be considered if the behaviour of staff needs to change to meet new objectives. 

The article is by Edward P. Lazear and Kathryn L. Shaw can be downloaded via nber.org. It is available for free for those with access to academic databases. If you don't have access the paper is $5, and worth every cent.

Growing too fast? Install a portal.

There's no news yet as to how this portal is being utilised but its a nice idea spawned by the desire to make an expanding team feel more connected.

Atlassian is growing…fast.  We expanded into a new floor and I was given the challenge of making it feel more Atlassian.  I wanted to make something decorative, but also functional.  Keeping the company connected becomes more challenging the bigger we grow, we span multiple buildings so some teams can go days without seeing each other.  Staff do chat through Instant Messaging (IM) frequently, but people communicate more effectively when they are face-to-face.
via blogs.atlassian.com

Treadmill desks and the walking meeting

Life saver? The treadmill desk.

It's worth reading this article about the treadmill desk. Don't dismiss it as a novelty. Its an example of how an idea was born, implemented, how its usage changed over time and how the concept spawned a new idea -- the walking meeting.

Then Levine had another idea. If people could work while they were walking, why couldn't they have meetings as well? And so the concept of the walking meeting was born. His plan was that a designated walking track could be marked out in an office using carpet tape. Two people walking together could both wear coloured badges so that everyone else knew they were in a private meeting and shouldn't be disturbed.

... remarkably a Minnesota financial recruitment company called Salo heard about his ideas and decided to put them into practice ... "we found that walking meetings not only tended to be more productive than sedentary ones, they're also, on average, 10 minutes shorter."

Read the whole case study at smh.com.au

Hey Boss — Enough with the Big, Hairy Goals - Bob Sutton - Harvard Business Review

I love Bob Sutton. After reading his book Good Boss, Bad Boss I have become a bit of an acolyte. What I like about him most is the tenacious way he demystifies and deconstructs common management practices. Like goal setting.

For most organizations in most industries, success is measured on well known and accepted yardsticks. Sure, there are differences and they do matter, but ambitious goals rarely send people in directions they didn't realize they needed to go.

In a post for HBR he questions the value of "big, hairy, audacious goals". Not only do they state the obvious, he writes, but they provide no practical direction for how employees can achieve them.

A good boss lays out the path to a big goal, and works with people to break it down into objectives that more clearly imply the necessary actions. Focusing attention on the little steps not only clarifies what people need to accomplish on a daily basis, it also allows people to enjoy Small Wins ...

... organizations tend to be stymied by big goals that have not been broken into bite-size pieces. Faced with seemingly huge and overwhelmingly difficult challenges, people freeze up or even freak out. So the best bosses not only outline the steps, they talk and act like each is not overly difficult — which quells people's fears and enhances their confidence that, if they just keep moving, everything will turn out fine. 

Good leaders break down lofty goals into tangible activities so employees can grasp them. In the experience I have had consulting with staff the inability to grasp a big abstract goal can apply to anyone, regardless of their seniority. So break the goal down into:

  • objectives
  • actions
  • hard actions versus easy actions
  • immediate steps
  • and finally, what needs to be accomplished daily for people to enjoy small wins.

Read the original post by Bob Sutton which includes a compelling case study and further references at blogs.hbr.org

The importance of making it simple for staff

Tesco, a UK supermarket chain has 3 rules for innovation:

The first is that innovation must in some way be better for customers; second is that it should ultimately prove cheaper for Tesco; and, finally, the innovation must make things simpler for staff.

Innovators within Tesco are made accountable for simplicity -- and this does not mean training staff which can in fact perpetuate complexity. Nor does "usability" and "human factors" solve the problem as they evaluate but do not generate simple innovations that staff can execute. So how do Tesco deliver on their simplicity ethos? They make their people accountable for it.

Accountability means that someone has sat down with the process owner or appropriate business team leaders and asked, "What does 'simple for staff' mean and how do we measure it?"

Pick whatever measures of effectiveness you like — time, number of steps, rework, etc. — but doesn't "simpler for staff" deserve respect comparable to "better for customers" and "cheaper for the firm"? After all, those get measured.

Implications for service design

Can you apply the Tesco heuristics to your concepts? Do your strategies and concepts present improvements for customers, productivity for the business and simplicity for staff?

Read the complete report at blogs.hbr.org