Is "fairness" better than Incentives?

If you have about 14 minutes, you can listen to this TED talk by Marco Alvera. Else please read the following few lines to get the gist of it. Marco Alverà is an Italian/American businessman and CEO of Snam, Europe’s largest natural gas utility. He has 20 years of experience in Italy’s most important energy companies. He holds a degree in Philosophy and Economics from the London School of Economics and started his career working at Goldman Sachs in London.

Everyone gets upset by unfairness. Marco says, “It triggers us so strongly that we cannot think straight. We become afraid and suspicious.” At work unfairness makes people defensive and disengaged. And disengagements costs business a huge amount in Dollars.

He joined an Italian government “oil” organization where salaries were fixed, and jobs were for lifetime. His toolkit of rewarding excellence and punishing poor performers was no longer applicable, he could not motivate based on risk and reward. Yet he found pockets of excellence in his organization.

His team was the best “oil finders”. They did not have more specialists than their private competitors, yet they consistently outperformed the Industry. He studied a lot and talked to field teams and industry experts to figure out how his team was doing great. He boiled it all down to just one key differentiation, “Fairness”.

His employees were not afraid of failing, their actions were not driven by short term performance linked bonuses. They knew the system was fair and will judge them fairly. So, they did not shy away from doing the right thing. They took risks on behalf of the organization and in the end it all worked well.

So, he decided to promote fairness, but what does it mean? More systems, more processes? He found it was much more than.

In summary two key things stand out:

• That it was not “head” but “heart”: The processes and systems need to be designed to promote transparency, ease of information flow etc., promote inclusiveness. Promote the development of the whole ecosystem, not just the organization, encourage people to spread the goodness.

• Weed out the bad examples at the earliest: One instance of unfairness will spoil it for many people and for a long duration. You must strive hard to eliminate all instances of unfairness.

As leaders, I wish we all take note of these two and promote fairness in all that we do. Give people the safe and warm environment to succeed not just because of the personal incentives alone, but for the whole ecosystem.