When I was working for a long established, British engineering company that had been growing steadily and moderately successfully, the Business Development Director spent months asking me what the best practice was in Reward strategy, he wanted us to follow it, whatever it was. His view was that, at that time, Microsoft was one of the best companies in the world and if we followed their reward strategy our business would be even more successful. Despite everything that I said about best fit rather than best practice he kept persisting that we should follow the Microsoft approach.
I explained that we couldn’t follow their reward strategy as they were in a different industry, had experienced fantastic growth and had used stock (shares) as the cornerstone of their reward design. But he still couldn’t understand why we didn’t do what they did. So I asked him if our business strategy was going to be the same as Microsoft’s and, of course, he said that it would be impossible for us to do the same as them – different industry, different products, different customers, different business model, etc etc.
That was when the penny dropped for him – reward strategy needs to reflect business and the people issues of the company, and this can’t be done by blindly following another company’s approach.
I was reminded of these conversations and the “easy step” approach that the BD Director wanted to follow as I looked at some US website publications recently.
I guess it started with the “7 Habits of Highly Effective People” by Stephen Covey. The premise is if you follow the seven steps you will be highly effective. I wonder if people will follow “opportunities” like these, I assure you they are all genuine:
Following the “5 (or however many) steps to success” is about as sensible as following best practice. It is easy and less risky but it is also the road to mediocrity and ultimately, failure. To beat the competition companies must exploit their unique strengths. Competitive advantages are scarce and fleeting because markets eventually drive a reversion to mean performance as middling companies emulate the best and the worst exit or undergo significant reform.
Good strategies therefore emphasize difference—versus direct competitors, potential substitutes, and potential entrants—not industry-wide best practice. This includes reward strategies!
What a great blog - limiting yourself or your business to a generic set of steps can provide nothing but limits!!!
Thank you Clive, an interesting ans enjoyable article. I agree wholeheartedly. Best practice used as a holy grail can actually destroy value if the target model is inappropriate for your business context. Used as a contextual reference it can be an excellent source of ideas, PROVIDED that you ask yourself why it was appropriate for the company which has been quoted being examplary.
If, instead of seeking to simply copy best practice, you ask yourself the right contextual question and find an optimal "fit" for you organisation, you can then move away from "best practice" to become "next" practice, giving your caompany a competiive advantage and staying ahead of the pack!
Finally, I believe that the determining charateristic of "good", "best" or "next" practice approaches is that they are time-bound - context changes with time and you need to ensure that your approach and practice evolves so as to integrate these changes.
Very good practical illustration of a fundamental strategic point in HR .
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