Allocating Rewards and Punishment

Every group must develop a system of sanctions for obeying or disobeying its norms and rules. There must evolve some consensus on what symboli­cally and actually is defined as a reward or punishment and on the manner in which it is to be administered. The shared assumptions concerning this issue constitute some of the most important elements of an emerging cul­ture in a new organization. Changes in the reward and punishment system are also one of the quickest and easiest ways to begin to change behavior and, thereby, begin to change some elements of the culture.

In General Foods, the norm developed that a product manager who did his job competently could expect to be moved to a bigger and bet­ter product within approximately eighteen months. Managers who did not move every eighteen months began to feel that they were failing. By way of contrast, in the early years of DEC, the assumption developed that the designer of a product should see it through from cradle to grave, so a reward was defined as being allowed to stay with a product through manufacturing and marketing all the way to sales. Being pulled off a project would have been perceived as a punishment.

In General Foods, promotion to a higher rank also correlated with all kinds of perquisites, notably a more spacious office in a better location with better furniture, higher- quality carpeting, and higher- quality art on the walls. All this was drawn from a central supply of these “status resources” very carefully allocated to each rank level. The headquarters building was designed to have movable walls so that office size could be quickly adjusted as promotions and job reassignments required. By contrast, in DEC, if a manager used promotion as an excuse for getting a bigger house or better car, Ken Olsen began to distrust him as being more concerned about per­sonal welfare than company performance.

In Ciba-Geigy, the key short-run rewards were the personal approval of senior management and public recognition in the company newspaper. Longer-range rewards were promotion to a higher rank or movement to a clearly more important job assignment. Length of assignment to a given job could mean that the person was either dead-ended or doing such a good job that he or she was irreplaceable. DEC used bonuses, stock options, and raises as signals of good performance, whereas Ciba-Geigy relied much more heavily on symbolic nonmonetary rewards such as a special privilege to attend a scientific meeting. Salary was tied more to rank and length of service.

Punishments, like rewards, have local meanings in different organi­zations. In several high-tech companies that have clear espoused values about not laying people off, people can lose the particular task they are working on and become “boat people” or “wander the halls” while looking for another job within the organization. They will be carried on the payroll indefinitely, but it is clear that they have been punished. Often the signals are subtle, but colleagues know when someone is in the “doghouse” or in the “penalty box.” Actual loss of bonuses or the failure to get a raise may follow, but the initial punishment is clear enough already. Some organiza­tions develop a “blame culture,” which implies that whenever something goes wrong, someone to blame is found and that person’s career is damaged.

One dramatic example was revealed in a cultural analysis of Amoco some years before it was acquired by British Petroleum. Amoco ’s man­agers and engineers explicitly called it a “blaming culture” in which the norm was that if something went wrong on a project, they had to identify who was responsible as quickly as possible. Who was more important than why s The person who was “blamed” was not necessarily punished in any overt way, and often was not even told that others considered him or her responsible. Instead, it was noted in the memory of senior managers as a reason to be less trustful of this person, leading to career limitation. People who were not given good assignments or promotions might never find out why. Consequently, employees viewed it as essential to distance themselves as quickly as possible from any project that might fail, lest they be “blamed” for the failure. This belief prevented Amoco from engaging in a joint ven­ture with another company because if a project failed, any Amoco employ­ees on the project felt vulnerable, even if it was clear that the failure was due to people in the other company.

Deciphering when a person has been rewarded and when a person has been punished is one of the most difficult tasks for newcomers in organiza­tions because the signals are so often ambiguous from an outsider’s point of view. Being yelled at by the boss may be a reward, while being ignored may be a punishment, and only someone farther along in the understanding of the culture can reassure the yelled-at newcomer that she or he was, in fact, doing well. As noted before, teamwork is usually touted as an important characteristic for promotion, but the definition of what teamwork is can vary all over the map.

What is rewarding or punishing varies with level in the organization. For junior employees, a raise or better assignment is a key reward, while for very senior managers, only a large promotion to a more responsible assignment or progress along the inclusionary dimension counts. Being told company secrets is a major reward, while being frozen out by not being told can be a major punishment that signals ultimate excommunication. Being no longer “in the loop” is a clear signal that the individual has done some­thing wrong.

In summary, the reward and punishment system of an organization along with its assumptions about authority and intimacy forms the crit­ical mass of the culture that determines how people will relate to each other, manage their anxieties, and derive meaning from their daily interac­tions. How you treat the boss, how you treat each other and how you know whether you are doing things right or not is a kind of rock bottom of the cultural DNA. So here again, as organizations become more multicultural, we will see different systems clashing with each other leading to hurt feel­ings, offence, impatience, anxiety, and other dysfunctional behaviors until mutual explorations in a cultural island setting produce understanding and new consensus.

Source: Schein Edgar H. (2010), Organizational Culture and Leadership, Jossey-Bass; 4th edition.

2 thoughts on “Allocating Rewards and Punishment

  1. Ferdinand Aboulissan says:

    Excellent read, I just passed this onto a colleague who was doing some research on that. And he actually bought me lunch as I found it for him smile Therefore let me rephrase that: Thanks for lunch!

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