Rudy Karsan -
Organizations
Wednesday, November 11, 2009 10:01:44 AM
I have been reflecting about compensation practices in the West and how they have evolved. A very long time ago, people paid for output: bartering in kind or services. For example, a farmer used his crop as “currency” and might exchange a bushel of grain for some service he wished performed by someone. The practice of bartering continued for a long time, even after the advent of money. The Industrial Revolution saw the rise of the manufacturing era, and people began doing a specific job for a specific period of time every day. Large manufacturing facilities initially paid for piece work. Slowly, as the service industry gained prominence and manufacture became more complicated, it became difficult to pay for piece work, but people were paid for the number of hours they worked. Until about 20 years ago, hourly rates still prevailed in many industries.
But over the last few years, the tide has begun to turn and now most organizations include some form of performance-based compensation. In fact, the performance component has almost doubled in the last 15 years. In future, as a society, we will see more and more output-based compensation, and this evolution is likely to take place far more dramatically, e.g., we might go from 15% output-based pay to 40% in a span of about 3-4 years. So we have basically moved from output-based to time-based pay and are moving back toward output-based pay again. How long will it be before we come full circle once again?