I was recently asked about merit systems and how they work. The fact is that there are relatively few organizations that implement a true merit system; however, there are many that say they have one. A true merit pay system means that people are rewarded and recognized on the basis of their performance. So when you have situations in which all employees in a specific classification or job are paid the same and get the same raises, as generally occurs in unionized environments for example, there is no merit pay system. Other organizations call pay increases “merit” pay when in fact they really are based on other elements, such as cost of living adjustments (COLAs) or profit sharing. Another reason why there are few truly “merit” programs is that the performance management systems that must assess performance either don’t exist, or they are inadequate, or they are not used, or they are used improperly. When the underlying assessment tool is faulty, the results on which merit pay decisions are made cannot be correct.

To sum up, a true merit pay system works poorly in most organizations, if it exists at all. In unionized settings, including those in public sector organizations, merit pay is seldom seen. While a great concept, merit pay mostly does not live up to expectations.

A few years ago I was in Santa Barbara, CA visiting a client on Halloween. The students at the University of California, Santa Barbara have a tradition of dressing up in costumes and parading informally throughout the downtown area on Halloween night, so I stayed into the evening to enjoy the show. After a while I went into a bakery to warm up before heading home. The young woman behind the counter began showing me a variety of treats, and insisting that I sample some of them. I finally said to her, “You’re spending a lot of time with me, and you don’t even know if I’m going to buy anything.” She replied, “That’s okay. My job is to make you happy.”

Wow! THAT’s the kind of experience your customers have when you align employees’ interest with organizational goals. (And yes, I did buy some baked goods before I left.) Yet I find that many executives and business owners don’t know how to achieve this alignment, which is critical for both employees’ and leaders’ success. When I am asked (frequently), “How can leaders align employees’ interests with organizational goals?” I have a two-step reply:

1. Create a vivid “big picture” or vision for the organization, and communicate it widely, frequently, and consistently, using multiple media and language that is appropriate for the audiences; AND

2. Paint the employees into the picture – i.e., make sure that each worker can state specifically what value he or she provides to the organization.

Both steps are important: employees who both see the organization’s “big picture” – i.e., its mission, vision, goals – AND can articulate clearly the contributions they make to achieving that picture are highly motivated individuals. In fact, they will be so energized that you will have to get out of their way so they can work! These are people who cannot wait to get to work every day, because they know they are making a significant difference in the world.

When I worked at Fed Ex during the early years (late 1970s and early 1980s), I couldn’t wait to get to work every morning because the environment was electric. We were on a mission to deliver critical packages “absolutely, positively overnight.” To empower us to do that, executives pushed decision-making down the ranks as far as possible and gave us great autonomy. Risk-taking was rewarded as long as mistakes were treated as learning experiences. When I traveled, I got a chill every time I saw a FedEx truck, and I loved the immediate attention I got when people discovered what company I worked for and peppered me with questions about it. Because purple is one of the company’s colors, my colleagues and I used to claim that “purple blood” ran through our veins.

What’s the secret to create such a highly engaged, productive workforce? Creating a clear “line of sight” between each individual and the organization’s goals – i.e., painting a clear, compelling vision and showing every employee how he or she contributes to it. Some of the elements I just named are very effective in maintaining that engagement – e.g., autonomy, trust in employees’ competence, and a culture that supports prudent risk-taking. Although I worked in staff positions, I still could articulate, and sometimes physically point to, what I did or contributed to doing. The visceral reaction I experienced every time I saw a FedEx truck or plane – either in person or in a movie or on television – meant that I felt a part of the company’s success. As a result, the company’s mission – “absolutely, positively overnight” – became mine as well.

If you would like to learn about a simple and quick technique to determine whether your employees are aligned with your organization’s goals, I invite you to read my article, The Transforming Power of Asking, “What’s Your Job?” Then let us know what you discover!

© 2011 Pat Lynch. All rights reserved.