Drive: The Surprising Truth About What Motivates Us pdfdrive com

ENSURE INTERNAL AND EXTERNAL FAIRNESS

The most important aspect of any compensation package is fairness. And here, fairness comes in two varieties—internal and external. Internal fairness means paying people commensurate with their colleagues. External fairness means paying people in line with others doing similar work in similar organizations.

Let’s look at each type of fairness. Suppose you and Fred have adjoining cubicles. And suppose you’ve got pretty much equivalent responsibility and experience. If Fred makes scads more money than you, you’ll be miffed. Because of this violation of internal fairness, your motivation will plummet.

Now suppose instead that you and Fred are both auditors with ten years’ experience working in a Fortune 200 company. If you discover that similarly experienced auditors at other Fortune 200 firms are making double your salaries, both you and Fred will experience a largely irreversible motivation dip. The company has violated the ethic of external fairness. (One important addendum: Paying people the Type I way doesn’t mean paying everyone the same amount. If Fred has a harder job or contributes more to the organization than you, he deserves a richer deal. And, as it turns out, several studies have shown that most people don’t have a beef with that. Why? It’s fair.) Getting the internal and external equity right isn’t itself a motivator. But it is a way to avoid putting the issue of money back on the table and making it a de-motivator.

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