Systems for managing people

Our behavior, whether we realize it or not, is dictated by the system of rewards and punishments in which we operate. Of course, our conscience also affects our conduct; however it is also, in some regards, a “subjective” source of rewards and punishments. 

Being conscientious is both a blessing and a burden; it means putting forth an effort so that our conscience guides us toward decisions that make us more human — those in which we have an increased desire to overcome challenges and contribute to worthy causes.

Having a conscience helps tremendously in times of confusion. When systems of rewards and punishments in a person’s working environment lead to dysfunctional decision making, awareness is perhaps the last great hope for an executive choosing to behave appropriately.

Why is our behavior so sensitive to the environment? The reason is that we are all the offspring of our circumstances, which constantly provide a source of learning and shape the neural connections that we use to make decisions.

Companies create positive and negative learning in people. Learning outcomes are positive when virtuous acts are associated with rewards and dysfunctional behaviors are linked to negative awards. Learning outcomes are negative when the opposite occurs. For example, when executives are given a nice bonus for excess risk, while shareholders foot the bill for the losses caused by these decisions.

Negative learning creates a kind of organizational schizophrenia that throws people off and makes them give less than their best. One learns that the effort required to have integrity, and be more human, is not worthwhile; and on the flip side, that dysfunctional behavior does pay off. This ultimately undermines everyone’s interests.

The big task facing executives is to build working environments that offer positive learning experiences to foster both the institution’s long-term health and the abilities of its people.

The people management systems used by the institution are, for behavioral purposes, the “environment” that we are referring to.

Systems are well designed when they reinforce the future plans of the institution by making sure they are kept alive and prioritized in the day-to-day decisions being made. They are also well designed when they promote positive learning outcomes from the point of view of personal fulfillment.

The following five systems for managing people tend to have the biggest influence on human behavior:

-        the recruiting and hiring criteria

-        the way performance is managed

-        the training provided

-        the compensation and incentive systems

-        terminations

In order for people-management systems to aid in developing the company’s future plans, it helps to ask oneself the following questions:

1. Does the company have a system to ensure that new hires are made according to the organization’s values?

2. Is there a system for “immersion” in the company culture, in the first few weeks, allowing employees to learn in depth about the company’s plans for the future?

3. Do the executives use a good system for setting performance goals and reviewing progress with the employees? Is the system designed to reinforce the company’s plans for the future?

4. Are efforts made to remove employees from the organization when their behavior is inconsistent with the company’s values? Is any special support given to employees who demonstrate average performance but identify with the values, so that they can improve?

5. Are incentive systems designed in accordance with company’s long-term objectives? Do rewards systems foster collaboration among the different areas and a sense of responsibility for the future?

We are all human resources. Therefore, it is everyone’s responsibility to ensure that the company’s system of rewards and punishments reinforces the plans for the future and the helps executives grow. It will be people who carry out the plans; and those plans should be developed by the steering committee.

For the “environment” to reinforce company’s plans, it might help to take the following into consideration:

#1: Recruiting and hiring:

Develop a simple process for interviewing potential candidates for any department based on company values, and creating a set of hiring criteria in line with those values. More importance should be placed on behavior and attitude than technical skills or experience; the more the criteria are aligned with the culture, the more of a good fit the candidate will be. It is best to hire people based on attitude and then develop their knowledge.

Companies should be aware of the power of first impressions, and, based on this, make sure the first few days for a new hire are focused on assimilating the company’s future plans.

#2: Managing performance:

We could define this as a series of activities aimed at encouraging managers to give employees a clear illustration of what is expected of them, as well as feedback about whether or not their performance is meeting those expectations.

It is best not to overly mix sanction processes with the performance management system. The latter may lead to the former, but both must remain independent.

#3: Incentives:

Remuneration systems must be designed as an incentive so that employees focus on their work to allow the company to execute its plans for the future and motivate employees to achieve personal growth and make a contribution.

Economic incentives are fine for the more routine tasks, but do not work as well for cognitive tasks that imply greater added value, where the key incentives are intangibles, such as a sense of purpose, learning, etc.

Thanks, recognition, increased responsibilities and any type of sincere appreciation can quite often prove more effective than monetary compensation.

#4: Terminations:

The decision to terminate someone’s employment makes considerable waves for an organization, its culture and, of course, the individual involved. As such, it is a key leverage point for building an organization focused on plans for the future.

The decision about a termination should be based on whether or not the person meshes with the company’s plans for the future and the impact it will have on improving upon the talent of their teammates. People whose behavior is consistent with the company’s values and future plans should stay and be supported by the organization. However, it these factors are not there then regardless of their performance, that person should leave the organization.




LENCIONI, P. The Advantage.