Carrot-and-stick systems

At a time when the debate about soaring executive compensation rages on, what is required of our CEOs is to examine the underlying theories driving the design of their systems for retaining and motivating leaders, writes Arun Maira in ‘Transforming Capitalism: Improving the world for everyone' (Westland). Posing questions such as, ‘Do people work for money only?' and ‘What else drives them to commit their time and talent to a cause?' the author wonders what could be ‘enough,' and whether organisations and their work can be designed to give humans more of the other sources of fulfilment than money they seek.

Reminding readers of the common argument of economists about rationality, Maira cites Harry Levinson's insight about carrot dangling from a string at the one end and a stick at the other, while in the middle what you can expect to see is a donkey. “He said that management systems based on the carrot and stick principle are basically designed for donkeys. The tragedy is that humans also, who work in these systems long enough, learn to live by these system's rules.”

Monetary reward

The author cautions that the fixation on money as the sole measure of value in economics and business management corrupts rationality, and that it leads to the belief that what is expensive must be worthy and, conversely, what is worthy must be expensive. Stating that monetary rewards can never be enough to satisfy all of a person's needs, he gives the example of how an investment banker, who was awarded a bonus of $10 million, was unhappy that his colleague was given, unfairly in his mind, a million more. “What he was really craving for, though, was recognition. And since the currency in which recognition was conveyed in his organisation was money, he was miserable with the bonus of $10 million.”

The assumption that we are all ‘selfish agents seeking to gain more' each for oneself, and that richer economies get created as a result, can be flawed because an excessive reliance on selfishness to motivate change does not produce compassionate societies nor even happy individuals, points out Maira. He underlines that human beings do care for others, and that they value the qualities of equity and justice in the organisations in which they work and in society.

An instructive anecdote narrated in this context is about Gandhiji – on how he retorted when someone said that he was a totally unselfish person. “That is not true. I am very selfish because I work hard to get something that matters a lot to me even if others do not seem to want it,” said Gandhiji. What mattered to him was that the weak are justly treated and are helped to stand up on their own, explains Maira. He mentions also the example of Lyndon Johnson, who knew that he could not have passed civil rights legislation in the US if he presented it as something that would benefit the blacks alone. “He sold it to the whites as a vision of a just society that they would be proud of – in other words, something that they would desire for themselves.”

Educative collection of essays with ready takeaways.