Let's have the right discussion. In the emerging work world of the Participation Age, great companies are racing out in front of these archaic ideas, and instead turning everybody into capitalists.
For the last few months there has been a renewed debate over raising the minimum wage, and this week the news is all about the push to provide over time pay for salaried managers who make less than $52,000, but work more than 40 hours in any given week.
The heart that drives this discussion is rightly motivated--don't take advantage of people. But the solution is archaic and backward-looking. It is focused on time spent at work instead of participation, contribution to the business, and most importantly, results. Time-Based pay comes from the Industrial Age Factory System that dehumanized people and recreated them as extensions of machines. Hourly wage and overtime conversations are simply putting lipstick on the pig.
The Right Discussion--Results-Based Pay
For thousands of years people were paid for how many shoes, pelts, candles, or chairs they produced, not how long they spent producing them. For as long as there has been work we have lived in a world where people were compensated for results, not time. If you made ten shoes during a week, you got paid for ten shoes. If you made thirty, you got paid for thirty. This worked because 80%-90% of all adults owned their own businesses and got paid directly by their customer for results delivered.
In a short 150 years these ownership numbers were reversed, with around 85% of people now working for someone else. As the Factory System developed, it made the fatal mistake of assuming that people would now work harder for Time-Based pay than for Results-Based pay. They were wrong.
Peter Piper Packed...
For three years in the mid 1980s, we led a summer leadership program for students. We got a Massachusetts pickle packing plant to give them jobs and agree to pay them for results delivered. Within a couple weeks they were packing twice as many pickles as Peter had been able to pack for many decades. In subsequent summers the company shut down a packing plant in California and shipped all their pickles to Massachusetts. People were paid for their results, not their time. They made a lot more money and so did the company.
Cut My Salary in Half, Please
A friend of mine, Alan Wyngarden, owns a small mortgage company. His loan processor made $55,000/yr and processed eight to ten loans a month; better than the industry average. They agreed together to reduce her salary to only $25,000/yr, but added an incentive for each mortgage completed with speed and quality. Within a year she was making over $125,000/yr and processing an unheard of twenty to thirty mortgages a month, with better attention to customers than before.
Alan has built four assisted living centers on the same Results-Based pay concepts, with higher than normal profit, salaries, retention, and staff advancement.
Everybody Is a Capitalist
Our company, Crankset Group, also employs Results-Based pay. One person got a substantial raise every month for thirteen months, doubling her pay because she kept adding more value.
The pickle packers, the Stakeholders at Alan's two companies, and our people all perform better because they are paid for their results, not their time. We turned them all into capitalists--the more value they add, the more money they make. We've done this with printing pressman, call centers, law offices, small and large construction companies, medical practices and others in just about every industry.
Time Based Pay is Degrading
Those clamoring for tweaks to the broken Time-Based pay model are perpetuating a system that degrades people. When employees are turned into Stakeholders, and invited to play the same Results-Based game as business owners, the overwhelming majority will perform better, just like they did for thousands of years.
Time is the New Money
One final reason to change the discussion. Results-Based pay allows people to finish their work by 3pm and go home, or stay until 5pm and make more money by producing more results than required. Many would like the extra money, but an overwhelming minority of people would rather be paid with extra time away from work.
Time-Based pay doesn't allow for that. You need to be at your desk for all eight hours, even if you were done at noon. In fact, you just might work slower so you can get overtime. At our company, if you are done getting your result for the day, we don't care where you are or when you are. It works. We've grown 709% in the last five years.
Industrialists Won't Like This
Those attempting to prop up the stale, exhausted Time-Based system won't like this. While smart companies are racing to embrace the Participation Age, the laggards are ignoring the clear data in favor of Results-Based pay. This also includes union bosses, who would be put out of work if their members could make more money or time without their advocacy.
Capitalism works best when everybody gets to play. Time-Based pay isn't capitalism, it's industrialism. Let's bury Time-Based pay with the Industrialists who invented it, and let's re-direct the discussion to accommodate the emerging work world:
How do we turn everyone into a capitalist so both the company and the people who work there benefit more? Results-Based pay is one of the core answers.