If Employers and Employees Do Not Establish a Partnership, It Does Not Bode Well for Either Side

In post-industrial, today’s ‘modern’ times, more than ever, the key to success in any business activity is a detailed understanding of the emotional needs and desires of people. Market opportunities today do not depend so much on reducing production costs and increasing profits as they do on developing new business models and sources of income based on new ideas. It is not the strongest or the smartest who survive – it is those who adapt best to changes, those who have balanced the interests and utilized the potentials of all stakeholders in their ecosystem. Today, in business, the words ‘trust’, ‘positive response’, ’emotion’, ‘feelings’ are used more often than ‘product’, ‘price’, ‘quality’.

It is undoubtedly an inevitable part of most interviews with entrepreneurs and managers that you will find in some business media or in their public addresses, a strongly expressed statement that people (‘human potential, human resources, human capital…’) are the most valuable and important part of their organization. At first glance, everything seems relatively simple. Is it so?

It seems simple, but it is not

As an entrepreneur, you know the mission and core values, you have a vision and have defined goals. As a manager, you have analyzed the environment, developed strategies, plans, and tactics. Finding reasonable sources of financing for the right ideas and profitable projects is not an ‘impossible mission’. What remains is ‘only’ to find the right people, place them in the right positions, nurture and lead them, reasonably motivate them, and… the world is yours. Is it really that simple to achieve? It is not, and it requires a high level of competence and commitment from entrepreneurs and managers in assessing the value of people in the organization and a precise insight into available acquisitions, as well as defining and systematizing the organizational structure and the pay and reward strategy in support of the business strategy.

If the conducted market and environmental analyses call the entrepreneur ‘to charge’, it requires a specific profile of people in the organization. Likewise, if the situation is different and the analyses indicate the need for different strategies such as nurturing customer relationships, changing activities and areas of operation, introducing new products, or increasing operational efficiency, the desired structure of people will be different. It will only be confirmed by a carefully conducted assessment of people in the organization and available acquisitions in the market or will require that the initially defined strategy be realistically refined or even significantly changed in accordance with the capabilities of the people. And so, perhaps after several persistent repetitions from ambitious strategy to available people and vice versa, the risk of discord between desires and capabilities will be minimized to a reasonable extent, avoiding an explosion of dissatisfaction. Establishing an adequate human capital management strategy, especially regarding pay and rewards, is an obligation to fairly and economically reasonably utilize potential people while ensuring their satisfaction, responsibility, and motivation.

Lessons from the Distant Past

In one of the models of management and measuring excellence in entrepreneurial organizations, one of the four key drivers of excellence is workers and organizational structure, the systematization of jobs and workplaces, and measuring and rewarding performance, while one of the five indicators of excellence is the results that arise from their behavior and work and the model of managing human potentials. This is a more modern interpretation of what Sun Tzu strongly emphasized in his ‘The Art of War’, and can still be treated as the warm water of leadership and management today: treat your soldiers as your children and they will follow you into the deepest valleys, they will stand by you until death (a quality model for managing human capital); for soldiers to understand the advantages of defeating the enemy, they must also be rewarded (adequately systematized jobs and workplaces and a well-designed pay and reward system); winning warriors win first and then go to war (economically reasonable planning at all levels: strategic, operational, tactical).

Different Views on Salaries

When setting strategic goals for human capital management systems and pay and reward policies, one must not forget the hierarchy of people’s needs and the chronology of their satisfaction, especially in conditions of inflation and (unnecessary) consumer stimulation. According to Maslow’s hierarchy of needs, the basic satisfaction of physiological (material) needs and the need for security is fundamental. To achieve that the needs for belonging and acceptance (a pleasant working environment), respect and status, and self-actualization become motivating factors, one cannot skip satisfying the ‘lower’ level needs (material needs and security). Only after they are satisfied do they cease to be motivating factors.

The perception of all stakeholders regarding salary is not the same. For workers, it is a measure of fairness and a source of material security. For citizens, the salaries of public servants may be recognized as a cause of increased taxes. For macroeconomic analysts, salaries are one of the indicators of the development of the economy of a particular country. Shareholders are particularly interested in the salaries of managers. Total salaries consist of base salary, various incentives related to work performance, benefits, and relational gains from work.

Rewarding the Team or the Individual

The pay system plays an extremely important role in restructuring, i.e., managing change. The change management strategy is associated with a powerful sign of change – the change in pay – which attracts the attention of employees and potential acquisitions. The change in pay in such situations can have two roles: it can lead changes or merely follow them. Regardless of the role, entrepreneurs and managers must know how to manage them and how to use them. It is important that the measurement system connects people largely with key goals and strategic initiatives, with organizational and team results, and only to a lesser extent with individual achievements. One should avoid the elephant-in-the-china-shop effect when achieving overly valued personal goals and profits acts contrary to strategic intentions, encourages individualism instead of teamwork and collective learning, problems are not solved but swept under the rug and thus passed on to others, which is usually more expensive and detrimental to the interests of other stakeholders.

The principles of the common good, justice, and solidarity in managing human capital should be checked for how they are respected and how they are included in the concepts of individual organizations, impartiality (striving for objectivity), concreteness (clear ‘rules of the game’), constructiveness (arguments and positive orientation), openness (two-way communication), honesty (permanently enabling feedback), reality (feasibility of agreed goals), incentivization (challenging), comprehensiveness (all employees), and ethics (valuing personalities and different jobs).

When You Have Succeeded

When all is taken into account, it can be said that creating an appropriate system for managing the partnership relationship between employer and employee, i.e., a model for managing human capital and the material motivation of workers (salaries and rewards), is a true art and a priority task for excellent organizations to solve. You will know that an organization succeeds in this and has prospects for longevity when you see that its people, who two or three years ago were insecure and had a narrow view of the world and their possibilities, now responsibly consider complex ideas and evaluate different perspectives.