Rewarding Excellence: Pay Strategies for the New Economy
One book, placed in its field — what Edward E. Lawler III's book gets right, where it goes further than the rest, and what the rest of the field adds.
Mike West, Editor · HR Leader Guide · peopleleader.guide/guides/profile-rewarding_excellence_lawler
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Rewarding Excellence: Pay Strategies for the New Economy
One book, placed in its field — what Edward E. Lawler III's book gets right, where it goes further than the rest, and what the rest of the field adds.
Mike West, Editor · HR Leader Guide · peopleleader.guide/guides/profile-rewarding_excellence_lawler
The problem
Organizational Performance and Competitive Advantage erodes when it is left to instinct instead of method.
You were taught the moves piecemeal, never the whole model.
Rewarding Excellence: Pay Strategies for the New Economy · Mike West, Editor · HR Leader Guide
The model
- 01Person-Based Pay (Skill/Knowledge/Competency)
- 02Performance-Based Pay
- 03Market Position of Rewards
- 04Reward Information Openness
- 05Employee Involvement
- 06Work Interdependence
- 07Environmental Change and Competition
- 08Line of Sight
Rewarding Excellence: Pay Strategies for the New Economy · Mike West, Editor · HR Leader Guide
Step 1 of 5 · Person-Based Pay (Skill/Knowledge/Competency)
Only pay for skills the organization can and will deploy, verified through demonstrated proficiency.
Misconception
Managers assume person-based pay is simply a more generous way to reward experience, so tenure and seniority quietly become the certification standard.
Reality
Person-based pay only works when skills are certified against demonstrated, currently-used competencies and are actually deployable; paying for dormant or obsolete skills inflates cost without adding organizational capability.
Rewarding Excellence: Pay Strategies for the New Economy · Mike West, Editor · HR Leader Guide
Step 2 of 5 · Performance-Based Pay
Aggregation level should follow interdependence: use group and organizational plans where work is tightly coupled.
Misconception
Practitioners believe that adding more variable pay automatically produces more of the behavior they want.
Reality
Incentives only motivate when employees have line of sight—a believable link between what they do and what they get paid; a large bonus tied to an outcome the individual can't influence is money spent without motivational return.
Rewarding Excellence: Pay Strategies for the New Economy · Mike West, Editor · HR Leader Guide
Step 3 of 5 · Market Position of Rewards
Differentiate market position by role criticality and skill scarcity rather than one company-wide percentile.
Misconception
Companies treat market position as a single organization-wide policy—'we pay at the 60th percentile'—applied uniformly across all jobs.
Reality
Market position is a portfolio decision: you can lead the market for scarce, high-leverage skills while matching or lagging it for readily replaceable ones, and the right differentiation is what protects both talent and budget.
Rewarding Excellence: Pay Strategies for the New Economy · Mike West, Editor · HR Leader Guide
Step 4 of 5 · Reward Information Openness
Openness about process is nearly always safe and beneficial; openness about individual amounts is a higher-stakes bet that requires a genuinely defensible pay structure first.
Misconception
Keeping pay secret protects the organization by preventing comparisons and the resentment they breed.
Reality
Secrecy does not stop comparisons — it forces people to estimate, and they consistently overestimate peers' pay and underestimate the pay-for-performance link, manufacturing exactly the dissatisfaction secrecy was meant to prevent.
Rewarding Excellence: Pay Strategies for the New Economy · Mike West, Editor · HR Leader Guide
Step 5 of 5 · Employee Involvement
Involvement strengthens the effort-reward link most when employees can see how their daily choices connect to the payout they earn.
Misconception
Involving employees in reward design means letting them vote on their own pay, which will only ratchet costs upward and dilute management control.
Reality
Involvement distributes understanding and ownership of the system's logic, not authority over payout amounts; employees who help set the rules police them more rigorously than any compensation committee.
Rewarding Excellence: Pay Strategies for the New Economy · Mike West, Editor · HR Leader Guide
A framework to use
The New Logic of Organizing
This framework is part of the full guide. See the guide →
Rewarding Excellence: Pay Strategies for the New Economy · Mike West, Editor · HR Leader Guide
The cheat sheet
- Person-Based Pay (Skill/Knowledge/Competency)Only pay for skills the organization can and will deploy, verified through demonstrated proficiency.
- Performance-Based PayAggregation level should follow interdependence: use group and organizational plans where work is tightly coupled.
- Market Position of RewardsDifferentiate market position by role criticality and skill scarcity rather than one company-wide percentile.
- Reward Information OpennessOpenness about process is nearly always safe and beneficial; openness about individual amounts is a higher-stakes bet that requires a genuinely defensible pay structure first.
- Employee InvolvementInvolvement strengthens the effort-reward link most when employees can see how their daily choices connect to the payout they earn.
- Work InterdependenceLet the interdependence of the work, not managerial preference, choose the reward unit.
- Environmental Change and CompetitionEnvironmental change is a moderator, not a backdrop — it changes which pay strategies pay off.
- Line of SightLine of sight lives in the employee's head; if they don't perceive it, it isn't there.
Rewarding Excellence: Pay Strategies for the New Economy · Mike West, Editor · HR Leader Guide
Sources
- Rewarding Excellence: Pay Strategies for the New Economy — Edward E. Lawler III
Rewarding Excellence: Pay Strategies for the New Economy · Mike West, Editor · HR Leader Guide