The Employee Contract – Are We Buying Outputs or Renting Capability?
By Michelle Malay Carter on November 4, 2008
Expanding upon my last post on managerial accountability … when you hire an employee, my friend and colleague Herb Koplowitz says, “You are renting employee capability not buying outputs.”
Herb helped write the FAQ section for the Global Organization Design Society which has just redesigned its website.? Check it out here.? It has a large,?free video and text library to which many generous Requisite Organization researchers, consultants and practitioners have donated their work and their expertise via interviews.
Here’s a quote from the FAQ section?on Pay for Performance:
“The employee is paid for the level of effectiveness he or she contributes to the system. This is not pay for results or for performance, if by “performance” one means output. (If you want to buy output from a person, make them a supplier or an agent.)
What you are “renting” from an employee is their capability. It is up to the manager to direct that capability towards tasks of the manager’s choosing (after considering the employee’s advice). This is why the manager is accountable for the employee’s output.”
Simple isn’t it?? I’m OK.? You’re OK.? Let’s fix the system.? Your thoughts?
Filed Under Accountability, Requisite Organization, Strategy, Talent Management
Comments
2 Responses to “The Employee Contract – Are We Buying Outputs or Renting Capability?”
Subscribe in a reader
The fancy and highfalutin jargon tripped me up a little. Just to make sure I understand, is he saying that we should pay for the value a person adds to the organization, and not necessarily for the number of widgets a person produces?
Hi Totally,
You’ve got it. And you cannot measure that. It must be judged.
Thanks for stopping by.
Michelle