Structure in Threes: Management Systems
December 11, 2013 Leave a comment
For the record I’m typically for performance based compensation systems. Maybe because I think you should be focused to perform your role for the best of the company to start with. I see approaches such as stack ranking, top grading, etc. as creating a cascading effect that has employees and management “game” the system. The end result is a death spiral where people spend more time looking good than doing good at the expense of the customer and investors. After reading chapter eight of Rummler’s book reDiscovering Value, I see why and where these systems have gone wrong; basically measuring and rewarding the wrong behavior (local optimization) rather than doing the best to create value across the enterprise.
I’m finding a lot to like about Rummler’s approach towards creating a management system that works:
- First reengineer the processes cross functionally to enable real value creation
- Second design a dual management system that focuses on the value creation performance and then resource performance
- Third design the compensation system weighted towards value creation system performance as top priority
I can see this approach keeping in check the desire to optimize resources in deference to creating value which is what keeps a business in business.