Just something I remembered as it becomes clear that it may not be a good thing right now (December 2009) to demotivate the very people who are expected to drag us out of the recession.

Giving a 1 percent raise boosts employee job performance by some 2 percent roughly, however offering that same money in the form of a bonus that is strongly linked to a job well done seems to improve job performance by almost 20 percent, finds a 2007 Cornell study on the relationship between pay and performance.

“I looked at both how much people are paid and also how pay increases and bonuses are given,” said Michael Sturman, associate professor at Cornel University

Often companies presume to motivate their employees through pay packages, including annual increases (USA aka – rises), bonuses and performance related pay. Very few employers (and 1st world governments) today really know how efficient the various mainstream incentives are.
Research done in 2007 by Michael Sturman from Cornell University in Ithaca, New York, exposes some accepted business myths – it shows that, how employees are paid, is at least as critical (if not more) than how much they are paid when it comes to improving employee performance.

Sturman’s study established, like many other studies before, that employees were more likely to push themselves if they were paid above market rates.

He found that smaller pay increases were more effective than equal-sized or even bigger bonuses in improving performance and retention. Regular employees perceived increases in their salary as more advantageous in the long-term, and therefore more important.  (Everybody knows that !-) don’t they? )

But here is the most interesting bit – despite the above clearly obvious findings , Sturman conversely found that when financial rewards were linked with performance, bonuses were much more effective than pay rises in improving employee effectiveness. This goes a long way to show that employees were more likely to see performance-related bonuses as special – ‘a gift for the gifted’ – and therefore worth going beyond the call of duty for.

A problem for companies (and governments) is that despite the findings that show (non performance-linked) salary increases are reasonably effective in inspiring employees into action, bonuses are far more economical simply because they don’t carry an expectation that carries over into following years.

So what IS the most cost-efficient way to motivate employees?

After a series of experiments, Sturman established that management who tied extra bonuses closely to an individual’s performance, could tentatively see an overall 16 percent increase in employee motivation. Substantial increases in performance could therefore be achieved without technically increasing the payroll budget.

Now here is the truly interesting bit – increasing the average annual salary from 2 percent to 3 percent would really only improve overall performance by an average of 2.2 percent, which is still a good thing, however it comes at substantial cost to the company.  BUT, if that raise was combined with changes and how bonuses are allocated, the overall rise in performance could be as much as 19 percent! In a weird (and wonderful) kind of way; bonuses pay for themselves and deliver a premium reward to everyone, however annual pay increases come at a cost to everyone; employees and shareholders and citizens.

If I may be permitted one thought for our governments and leaders to mull over and consider in our journey toward Christmas, Hanukkah and onward to another exciting year on our fabulous planet

“Power is about what you can control, Freedom is about what you can unleash”

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Gary Sage :

Do You Worry About What Others Think of You?

3/25/2009 2:06:00 PM

“What you think of me is none of my business.” – Wayne Dyer

What would your life look like if you were literally unable to worry about other people’s opinions?

What a freedom that would be! You would live according to what you thought was beneficial for you and make decisions without second-guessing, over-analyzing, and shoulda-coulda-woulda-ing. You would no longer have any need for approval nor fear of disapproval.

The truth is, we don’t have any need for approval. Not truly. It is our egos that crave approval and fear disapproval. The mind loves to take things very personally and attempts to gain power through approval and disapproval games. When we separate ourselves from our ego, approval and disapproval have no value whatsoever. And nothing is taken personally.

In reality, another person’s thought or opinion about you is never personal, because it is never really about you in the first place. It’s about them. Our thoughts about anything and everything are only about ourselves. As Byron Katie points out, what I think and what I feel is my business. What you think and what you feel is your business. When I’m worried about how you feel about me, I’m in your business. And if I’m busy living in your business, how am I present for my own business?

When we let go of worrying over other people’s opinions, we are free to reflect on our own opinions of ourselves. Am I happy with myself? Did I make the right decision for me? Am I happy with how I treated you? Am I living in healthy and positive ways, for the highest good of everyone involved?

Living according to our own truth is one of the highest acts of self-love and self-care. And when you live according to your truth and stay in your own mental business, others will honor you and the truth you live, too, whether they agree with you or not.

“Patterning your life around others’ opinions is nothing more than slavery.”

- Lawana Blackwell

via OpenZine.

Gary Sage :

Want to impress your senior management?

Then you need to learn how to fight – and no this has nothing to do with white collar boxing or blue collar cagefights, – arguments happen and promotion lies ahead for those who can effectively ‘fight professionally’. Confrontation and conflict are the modern way of testing and challenging everything in the fast moving world we live in. For some it is the only avenue available to get things done or changed. Conflict and confrontation are here to stay. True conflict control is the use of influence and critical skills to gain control in a situation rather than manage the situation itself. Conflict – in most business contexts – entails a clash of emotions, expectations, hopes dreams and agendas, and is often hidden behind an elusive nominalization called “a situation” or “an issue”.

The solution is to control it effectively – one insider secret relies on a concept borrowed from boxing and other martial arts – namely sparring. In a ring the aim of sparring is for both parties to improve their skill without the express need to determine a winner. I am glad to see that even the grand master of networking Keith Ferazzi advocates this as a technique.

First, please bear with me while I set the scene.

The novelist F. Scott Fitzgerald made his famous observation in his 1936 essay “The Crack-Up”, about the test of a first-rate mind – he stated that “an intelligent person should be capable of holding two opposing ideas in his head and still function.”

Although the precise form or sparring varies, it is essentially relatively ‘free-form’ fighting (so is workplace sparring), with enough rules, customs, or agreements to make injury unlikely. By extension, argumentative debate is sometimes called “verbal sparring”. As in all disciplines the physical nature of sparring naturally varies with the nature of the skills it is intended to develop; the organization of sparring matches also varies, if the participants know each other well and are friendly, it may be sufficient for them to simply play, without rules, referee, or timer. If the sparring is between strangers, there is some emotional tension, or the sparring is being evaluated, it may be appropriate to introduce formal rules and have an experienced supervisor or referee in attendance. Sparring is normally distinct from competition, the goal of sparring normally being the education of the participants, while a competition seeks to determine a winner.

Workplace sparring focuses around a central premise or set of principles: non-violence (anything else would be bullying) and frankness. Clear impersonal honest, frank observations delivered whether you want to hear it, or whether you don’t.

“A good listener tries to understand what the other person is saying. In the end he may disagree sharply, but because he disagrees, he wants to know exactly what it is he is disagreeing with.“ – Kenneth A. Wells

People who are objectively frank and able to spar without bringing emotional baggage to the issue get promoted faster period!

Here’s why:

• Frankness inspires integrative thinking – namely the ability to constructively face the stress of opposing scenarios and, instead of simply choosing one path at the expense of the other, generate a creative resolution of the tension in the form of a new model which contains elements of the opposing models but is superior to each.
• Creativity and Innovation – tough frank exchanges between people will trigger an integrative reaction – these people generate entirely new insights, new ideas, and new approaches.
• Being frank demonstrates to your superiors are that you are in turn superior on four key points: you take a broader view of what’s relevant to the decision – you explore what and how elements relate to each other – you observe the problem in all of its complexity rather than chunking and breaking it into parts – and you never allow unpleasant compromises or trade-offs to provide solutions. The beauty is that you always seek out a creative outcome – a new model that contains elements of the individual opposing models but is superior to each. This alone provides a platform for creative contribution, by not allowing a compromise (or backing-off completely) to masquerade as a resolution. Just knowing this critical skill, will make you disproportionately able to come up with breakthrough ways of doing things and you will get noticed.
• Silence when issues are at hand is seen by most management as a cowardly form of denial.
• Better risk assessment. Most people who back away and avoid “saying it like it is”, as a misguided exercise in ‘career protection’ are not held aside for promotion because they are seen to be not risk averse but risk avoidant they not promoted because they are non-participants! Being frank demonstrates the capacity to asses risks, preparing you to solve problems collaboratively and demonstrates a high level of emotional stability (EQ).
• Getting things done: Workplace sparring denotes a sense of commitment where frankness and candour combine and drive your efforts to manage change through growth, creativity and constant improvement.
• Frankness when done properly shows up as a more considerate and joined-up work environment – candour and frankness by definition blows the chances of success for the mediocrity-driven approach which thrives on and through “jobsworth” office politics, working to rule, backstabbing, sniping and email flames.

Things to know about the workplace ‘ring’

Fighting is dangerous, and sparring can be dangerous. Frankness, irrespective of how its is delivered, and no matter how much care and respect is applied or taken into account, can and certainly will push people’s buttons. That’s a fact – so you need to get used to it and you need some basic checks.

There is one overriding check that must apply at all times – safety – before you speak and before you answer: Are you being truly frank objective and candid in your observations, expectations or requirements, and is it safe to proceed? First – check your own emotional state and ensure that the environment is safe. Insensitive candour and frankness without due consideration and care for the other party is insensitive and stupid – tantamount to bullying and coercion.

Understand its only information you are dealing with and make it clear by saying something along the lines of “Before I jump to conclusions . . . . This is the information I have. . . . . . that leads me to this observation . . . .” State that you expect them to be the owner of the input, the solution, and the outcome(s). State clearly that your comment is only data or information – they have full right to decide how to respond and when.

No leading questions, only ask clean questions and distill or contest ideas by asking questions. This allows flaws and missing data to arise for discussion without anyone getting defensive. Stepping through the thought processes that lead up to or represents the flaws is key to integrative reasoning. The beauty is that you always seek out a creative outcome – a new model that contains elements of the individual opposing models but is superior to each – expect new insights while you get to avoid ego-trips or victim mode.

Frankness and sparring can get heated, even aggressive, and sometimes you will need to express yourself more bluntly than usual if you wish to overcome that bugbear human condition called ‘denial’ – sparring by definition is about not pulling any punches – someone will be required to defend against a sparring move and it may hurt the recipient a bit, because sometimes you need to make sure your point is genuinely heard. Should you get frustrated make it very clear you are getting annoyed not because of a difference in opinion but because an important point is being deliberately ignored.

Forget all that crap about Active Listening. Paraphrasing may work on some people but anyone with an iota of an analytical mind will soon become very irritated at being paraphrased, simply (sic) to confirm what they already know they have just said – but with someone else’s spin on it! Anybody who has argued with a polarity responder knows that unless you play their ‘exact words’ back to confirm what they are saying a you will end up at cross purposes. Folks – it’s ALL about engaged listening.

First, be human, give the person a genuine smile. A smile says, “I’m approachable”. Maintain a reasonable balance of eye contact. Unless you are Tim Roth in a ‘lie to me’ episode – know this:- If you maintain an unblinking stare 100 percent of the time, that qualifies as leering – and it’s just plain scary in my experience! If you display eye contact less than 65-75 percent of the time, you’ll seem disinterested and rude. Somewhere in between is the balance you’re looking for – I always look for signs of compassion, happiness or sadness in other people’s eyes. Laughter lines and wrinkles are especially interesting things to admire in the other person. Find something to admire in another persons eyes and they will feel like they are the most important person in your world!

Unfold your arms and relax. Crossing your arms can make you appear defensive or closed. It also signals tension. Relax! – people will pick up on your body energy and react accordingly. Nod your head and lean inward, but without invading the other person’s space. You just want to show that you’re engaged and interested. The engaged listening method helps to diffuse any volatility and keeps things process focused.

If you are not confident in your ability to be frank and open and if you are unsure as to how you will respond to candid feedback or observations then PRACTICE!!!! Practice on that difficult shopkeeper, ticket inspector maybe some of your friends. Get used to the idea of frank, no holds barred candid conversation – and to help you to get over defensiveness when people give you feedback – say to yourself – “this is information – I’ll determine the threat level later”. Once you can do this with ‘friends and family’, then move on, take on your colleagues managers and reports.

When issues arise, in some really unpleasant companies people will withdraw into a cowardly form of denial called silence. Most companies will pay lip service to the problems, at least to the authorities, but the underlying situation still exists. However, enlightened companies encourage everyone to assess the value and address the confrontation, up-front and up-to-the-moment. And they will resolve the problem. Doing this consistently, takes skills and maturity.

Point them to this link.

Be sensible and be sensitive – otherwise you might really get thumped! Do this right and your arguments will almost certainly take to up to the next level.

Gary Sage :

Early stage venture capital is by definition milestone based investing. The entrepreneur raises enough capital to get to a significantly different place with his or her business and both the entrepreneur and the investor hope that the next round will be done at a significantly higher price that reflects the progress made.

This is one of the main reasons why I think early stage venture capital is a much less risky form of investing than many outsiders think. Most experienced venture capital investors scale the dollars invested in a startup such that they don’t have much capital at risk when the investment is the most speculative and they increase the capital invested as the risk is mitigated.

But sometimes investors get too cute with this milestone based investing approach and try to build that into the investment round itself. This is called “tranched investing” and serial entrepreneur Chris Dixon has a post on it this morning.

I agree with Chris that tranched investing is a bad idea all around. But first, let me explain how it works.

The entrepreneur will agree to raise a set amount of money, let’s call it $3mm for a set amount of equity, let’s say it is 25% of the company ($9mm pre, $12mm post). If it is three tranches, then $1mm will come in at the first closing and the entrepreneur will dilute 8.33% (1/3 of 25%). There will be a set of agreed upon milestones set in advance. Let’s say tranche two milestone is the shipping of a product and tranche three is the first contracted revenue for that product. When each of those milestones is hit, the investors will invest the second and third $1mm tranches and the entire round will be completed and the full 25% dilution will have been taken.

Let’s be honest and see this as what it is. It’s an option for the investor to put more money in at the old price as the investment increases in value and the risk is mitigated. It’s a bad deal for the entrepreneur and a great deal for the investor.

But as Chris explains, there are other problems with this approach:

Milestones change anyway:  At the early stage you often realize that what milestones you originally thought were important actually were the wrong milestones.   So you either have to renegotiate the milestones or the entrepreneur ends up targeting the wrong things just to get the money.
The idea that you are going to hard wire the key goals of an early stage company is nutty. The best entrepreneurs weave and bob their way into the market, changing things as they go. Setting hard goals is a mistake early on in the life of a company.

The idea behind tranching is right which is to limit the capital at risk (and the dilution) until the business increases in value and risk is mitigated. The right way to do this is raise smaller rounds more frequently and negotiate the prices of each financing as the round is done.

via Milestone Based Investing.

Gary Sage :

We live in a power hungry world where so many so called leaders are simply dressed up authority figures -  they are not true leaders at all. The next generation of true leaders will use entirely new approaches to convey their fresh ideas. Today’s manipulative and over-regulated business processes and authoritarian prescriptive business mindset will not survive intact.

I  know, because I spend a lot of time working with a lot of young people – and they are quite happy to toss what is truly wrong in business out of the window and start again.

Umair Haque, a consultant for big business  has written a preview of tomorrow in something he calls the Awesomeness Manifesto.

“SO. What is awesomeness? Awesomeness happens when thick — real, meaningful — value is created by people who love what they do, added to insanely great stuff, and multiplied by communities who are delighted and inspired because they are authentically better off. That’s a better kind of innovation, built for 21st century economics.

I’ve talked to many boardrooms about awesomeness. Beancounters feel challenged and threatened by it, because it feels fuzzy and imprecise. Yet, it’s anything but. Gen M knows “awesomeness” when we see it — that’s why its part of our vernacular. It’s a precise concept, with meaning, depth, and resonance.”

Awesomeness may sound fuzzy and imprecise .  Haque’s point is that the new generation leader knows awesomeness when they see it. The Awesomeness Manifesto is chock full of ideas for business built on sustainable value where the central role is to make the world a better place.

Haque talks about the power of Love, sustainability, remixing value, and the new way of innovation.These are the four pillars of his Awesomeness Manifesto:

Ethical production: without an ethical component, awesomeness isn’t possible. The buy low, sell high mentality is yesterday’s mantra.

Insanely great stuff: put creativity front and center and you’ll get an emotional reaction from anyone who sees it. Delight the customer.

Love: Apple creates products people love. Their employees love to show off how awesome these products are and customers love shopping in Apple stores. Compare this with Best Buy.

Thick value: this is real, meaningful, and sustainable. Thick value, not thin value, actually makes people better off.

Finally a business guru who understands!

awesome!

Want to help kickstart awesomeness? The Manifesto is now a collaborative, open-source project, to which anyone can contribute. READ this post for details.

http://blogs.harvardbusiness.org/haque/2009/09/is_your_business_innovative_or.html

Gary Sage :

Selbsverständlich! (german: obvious)

Research shows group members equate creativity with conformity.

Creativity is a much coveted asset for a very simple reason: an idea that transcends orthodoxy has the power to bring wealth, fame and status. Commercial, scientific, educational and artistic organisations, therefore, often talk about how they want to foster creativity.

Unfortunately groups only rarely foment great ideas because people in them are powerfully shaped by group norms: the unwritten rules which describe how individuals in a group ‘are’ and how they ‘ought’ to behave. Norms influence what people believe is right and wrong just as surely as real laws, but with none of the permanence or transparency of written regulations.

The enemy of creativity

These unwritten rules or ‘groups norms’ flow almost imperceptibly from one person to the next so that changes are difficult to spot unless they are carefully measured. A classic psychological study on group norms randomly allocated new university students to either conservative sororities or more liberal dormitories (Siegel & Siegel, 1957). Over time students assigned to the liberal dormitories became less conservative as the group’s norms seeped into their consciousness.

Not only do norms spread like wildfire, groups don’t even need to be that well-established, people will conform to others with only the slightest encouragement. In another classic social psychology study people thrown into a group of strangers denied their own senses to increase their conformity with others. When simply judging the length of a line, participants happily went along with the group despite clear evidence from their eyes that the group was wrong.

Thinking inside the box

The purpose of norms is to provide a stable and predictable social world, to regulate our behaviour with each other. In many respects norms have a beneficial effect, bolstering society’s foundations and keeping it from falling into chaos. On the other hand stability and predictability are enemies of the creative process.

When groups are asked to think creatively the reason they frequently fail is because implicit norms constrain them in the most explicit ways. This is clearly demonstrated in a recent study carried out by Adarves-Yorno et al. (2006). They asked two groups of participants to create posters and subtly gave each group a norm about either using more words on the poster or more images.

Afterwards when they judged each others’ work, participants equated creativity with following the group norm; the ‘words’ group rated posters with more words as more creative and the ‘images’ group rated posters with more images as more creative. The unwritten rules of the group, therefore, determined what its members considered creative. In effect groups had redefined creativity as conformity.

In another part of the same experiment these results were reversed when people’s individuality rather than their group membership was emphasised. Creativity became all about being different from others and being inconsistent with group norms. When freed from the almost invisible shackles of the group, then, people suddenly remembered the dictionary definition of creativity: to transcend the orthodox.

Camels are horses designed by committee

So of course schools kill creativity, of course politicians are fighting over the middle ground, of course most TV programmes are the same and of course all our high streets are identical. People are social animals who work in groups and, especially with the advance of globalisation, the number of groups that govern or control our world has shrunk. These groups naturally kill creativity, or at least redefine it as conformity.

Creativity within groups isn’t impossible, though, it’s just that it has to fight all the harder to get out. Coming up with something truly new often means having to steer a path away from the herd, towards new horizons.

So if you really covet creativity, then there’s one rule you’d be well advised to follow: go it alone.

via Why Group Norms Kill Creativity « PsyBlog.