Chapter 3 Defi ning Internal Alignment 91 whether the differentials motivate engineers to contribute to Lockheed’s success, and whether they are considered fair by the engineers. The next several chapters discuss how to manage these internal structures.
Let’s turn again to that “so-what” question and the pay model. Why worry about internal alignment at all? Why not simply pay employees whatever it takes to get them to take a job and to show up for work every day? Why not let external market forces or what competitors are paying determine internal wage differentials? Or why not let a government agency decide?
Efficiency
Research shows that an aligned structure can lead to better organization performance.
57 If the structure does not motivate employees to help achieve the organization’s objectives, then it is a candidate for redesign.
Internal pay structures imply future returns. The size of the differentials between the entry level in the structure and the highest level can encourage employees to remain with the organization, increase their experience and training, cooperate with co-workers, and seek greater responsibility. 58
Chapter 2 raised the strategy question, Do you want to be difficult to imitate? We already noted that the number of levels and titles in a career path may be rewarding beyond the pay attached to the titles. Microsoft added a “distinguished engineer” title to its structure.
The consulting firm McKinsey and Company added an “associate partner.” Their rationale was that employees are motivated by these more frequent steps in the career ladder.
These are new titles and levels that are not yet reflected in the external market.
Fairness
Writers have long agreed that departures from an acceptable wage structure will occasion turnover, grievances, and diminished motivation. 59 But that is where the agreement ends. One group argues that if fair (i.e., sizable) differentials among jobs are
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