Sober Up with Associative Compensation

People around the world have very mixed feelings about the United States.

There is one thing that just about everyone I’ve spoken to can agree on, however, and that is the in the US, we have great service. Truly second-to-none.

This feeling is almost universal.

You could speak to the hardest core jihadist and he would tell you, “Yes, the American Devil must pay for his crimes and the evil United States is responsible for all the world’s problems. The staff at the Denny’s I went to in Michigan for that bomb-making seminar was quite pleasant, however.”

This isn’t because American’s are the friendliest folk on the planet, but because we have a financial incentive to make sure that customers have a good time, and that financial incentive is called tipping.

However you feel about tipping, it’s hard to argue with the fact that it does seem to enliven people in the service industries like little else can. If they don’t do their jobs well, they’ll make less money. If they do exceedingly well, they’ll make more money. Some people will shirk the system and not tip at all regardless, but I’m describing the average here.

So knowing this, why don’t more jobs come with additional incentive to do your best work?

For most people working a 9-to-5, the only valid reason to even show up is that if they don’t, they’ll be fired. Getting the optimal value out of someone who feels this way about their job is tough.

So why not make it worth their while? Give them a financial incentive to do better work that is directly tied to performance, rather than being tied to time (like an hourly wage), seniority (like a scheduled raise), or politics (like a new title).

This incentive could come in a lot of forms, but the most direct is to give them stock in the company. Make it super-easy for them to keep track of how their efforts impact the company’s bottom line, too, with an app or a personal website where they can track the stock prices or department revenue month-by-month.

Give them all the resources they need to see the direct relationship between their efforts and the rewards they receive and they’ll play to win.

Give them nothing but threats and routine and they’ll sit on the bleachers and drink beer. Lots and lots of beer.

Associative compensation or drunken employees.

Your choice.

Update: February 2, 2017

There’s now a name for this idea: results-based management.

And there are pros and cons to it. The pros being what I argued for above, and the cons being that it doesn’t always work that way.

It does seem like the counterpoint, though, is that if people believe in the work they do, it helps incentivize them to do it well for the sake of doing it well. Because they can be proud of that work. You have to run a very specific kind of business to make this happen, but I actually like that even better, when it’s feasible.