This is a quote from People Matters by Peter Block — one of my favorite thinkers on how to create more meaningful work. It starts focused on HR, but quickly blossoms into a vision for reinventing the whole corporate structure for the good of… well, everyone.
Wow, I love this.
HR is a player in the question of corporate and societal ethics. Most unethical or corrupt behavior starts from the HR/Management philosophy of compensation and rewards; they think that money motivates people and they also believe that variable pay is the way to motivate performance. The extreme version of this is including stock options as a serious component of executive pay. This philosophy creates a context of excessive short-term orientation where unethical behavior is more likely. If companies link payment to stock prices, they are creating a false god. Then CEO will not be incentivized to invest in the long-run, they will be incentivized to cut costs, maximize short-term profits, and postpone development.
What is interesting about this compensation philosophy, especially at the executive level, is that companies are not rewarding for commitment and long-term alignment of these managers but actually creating conditions to encash compensation and leave the organization.
It is not only a question of compensation and motivation philosophy, it is a question of purpose. Leadership needs to look at their business with a larger purpose than shareholder value. Leaders focusing on just making money will not build companies or the country. Asking oneself what is the larger purpose of the organization is the ethical question that managers should pose to themselves. Pay fair salaries to avoid bribing, make salaries transparent and even publish them to avoid excessive focus on compensation. The systems already exist to prevent unethical behavior, more checks and balances will not help. When controls do not work, adding more is madness. What is needed is more internal and external transparency. Whistleblowers also will not lead to systemic change, because the case just appears to be an exception. Board of Directors again cannot help as most of the times they do not know enough details to find questionable practices until something blows up. It is the coming together of corporate leadership, business schools, citizen groups and government to call for a shift in pay practices and purpose. The purpose of companies should be for the common good.
This is possible because it is in human nature to do the right thing. I believe that given a choice, most people will choose a larger purpose. Unfortunately, our western economic system is based on the assumption that men are driven by self-interest and the most valuable things are those that are scarce. This is not true, it is just popular. We need to break this assumption. We are cast under the spell of conservative, last century economic thinking. Luckily, that is not working well in the west.
It is not correct that the entire universe around the individual today is going wrong; what is going wrong is the narrative; we need to change the conversation to change the reality. As long as we continue the problem narrative that people are selfish, government and leaders are corrupt, more control is needed, and the west is the model for our future, nothing will change. The new narrative is about abundance, those who act on higher purpose, and the possibility of the common. It is close at hand, we just do not think it is news.
(Emphasis added by me.)
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Choices Will Terminate You by Josh Allan Dykstra on January 26th, 2010