„Money alone does not make happy, but it calms enormously”

Dear reader,

What is more motivating? An applause from the boss, a pay rise, a bonus for good individual performance, a company car or the task as such, the plus of responsibility, the option of a career jump, the promotion? I think, each of them at its adequate point in time and in its own mode, whereby the value of a pay rise reportedly can last fairly short.

Remuneration has to be just or needs to be regarded as just. What do we consider just? When a company’s salary ranges comply with the market and we are in the middle of it? When general pay rise equals at least the results of wage negotiations or the inflation rate? Or, if I earn at least the same like my colleague, whom I judge that I am at least as good or even better? But officially, I do not have a clou of it, as it is principally forbidden to speak about it.

There are many ways towards a just remuneration. The basic or fixed salary, the performance-linked variable salary, long-term incentives, which shall be oriented to the company’s success and shall bind employees, the company car, the company pension scheme, etc. These all are elements which are to be evaluated in the context of “total compensation” and could be suited to take into account also individual needs of employees.

Performance-linked remuneration connected to negotiated achievements is a wide-spread management tool. How is performance compensated in a just manner? First of all, performance and the agreed objective need to be measurable – which is, as we all know, not always an easy task.

Above all, it becomes difficult, if the evaluation of individual performance is mutilated beyond recognition by “performance management” and/ or a panel discussion – a process which often affords more of the superior’s expensive working time as it releases money for motivation.

It becomes difficult, too, if - under the pressure of a Gauss distribution curve – good performance of employees in a “just change” is evaluated good this time and less good next time, because the Gauss law demands, that by way of a strict budget discipline the “more” of one individual needs to be taken from another one.

It is thus worth to consider replacing the fixed linkage of achieving individual objectives and remuneration by a bonus that is paid in the context of outstanding individual achievements, since the narrower the time span between performance and bonus is, the more just and motivating a bonus is appreciated. Management bonus, in future, should only reflect the company’s success.      

It is a blessing that speaker’s committees[1] exist. They have the chance to add arguments into the salary negotiation rounds and to advise the company on improvement options for the remuneration system, on the backlog for example in comparison to wage negotiation rounds and on a forgotten market check.

In case the company ties in speakers committees in a partner-like mode into issues of remuneration – and remunerations systems as well as unavoidable zero (pay rise) rounds do apply to board members - , remuneration has a good chance to be accepted as just and as motivating.

Yours,

Bernhard v. Rothkirch

[1] Special tool of employees‘ participation covering managers and governed by German law.

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