By Everson W. Hull, Ph. D
On Wednesday, September 8th, Caribbean development enthusiasts were treated to a very thoughtful lecture delivered by Dr H. Gene Leon, the newly elected president of the Caribbean Development Bank. It was the inaugural address, in a newly established lecture series in honor of the very distinguished Sir Owen S. Arthur, with a very fitting title – “Re-designing Economic Growth Strategies”.
Dr Leon’s lecture was outstanding in drawing attention to a number of very thoughtful growth strategies. It was refreshing to observe the wide range of alternative approaches that were offered for consideration. The depth and breadth of his focus was most impressive, including his recognition of the significance of the large talent pool that is widely dispersed across the region.
Notwithstanding, while teetering about the edge of a solution to the lethargic performance that has handicapped our region, his presentation fell short. The very distinguished doctor knocked on the door; but like others who have come before him, chose not to step inside.
He did not allow himself to offer specific actions that would motivate individual members of our very talented labor force to produce at their optimal level; in implementing the policy actions that he very carefully outlined. Using the language of his discipline, it would be fair to say, that the proposed policy actions, albeit necessary, were not sufficient.
Of special concern, is the likelihood that the region will be left in the same low productivity bucket that it has occupied over the past 40 years. The ordinal performance ranking, as measured by per capita income, is not radically different from what it has been forty years ago. The Bahamas which was at the head of the performance class 40 years ago has consistently sustained its lead in each and every year, and the most recent World Bank data shows the gap widening. Very few CARICOM countries have significantly improved their ordinal performance ranking relative to their peers that existed 40 years ago. As a result, we remain badly exposed to every obstacle that is strewn in our path.
The rapid innovations in technology and associated new innovations that were detailed by the distinguished presenter are most important. There is concern, however, that we will continue to fall short of extracting optimal performance from our labor force, unless each worker is offered an Incentive-Based-Compensation Plan that clearly links compensatory rewards to the productivity of each individual.
This is a matter of serious concern. In the overwhelming majority of workplaces across the region, in both Latin American and the Caribbean, we have forgotten the individual. Our speeches and policies suggest that the individual does not exist. There are no performance scorecards that measure his or her individual performance. We have no scorecard or method in place for carefully measuring and comparing the individual’s performance this year with his or her performance last year.
The absence of a performance scorecard and commensurate rewards will not work in cricket. It will not work in soccer and did not work at the just-completed Olympics where each individual, who did the grunt work and outperformed his or her peers, earned a prize.
The reality is that folks, in the same pay bucket, do not show up to work each day and knock themselves out in the delivery of goods and services because of love for country. Although we are deeply ethnocentric, each has an infinite range of aspirations. To illustrate, they aspire to making their rental payments on time, to take care of their families and to send their kids to the finest and often most expensive schools.
These very healthy aspirations, invariably come into conflict with a rigidly fixed pay band in which each employee receives the identical pay. There are no rewards for supra-normal performance. This is a recipe for disaster. The brilliant and highly talented employee has no incentive to outperform his colleague, Joe Six-Pack, who is in the same pay band. The absence of these incentives and rewards is harmful to our member states. The resultant lower rates of productivity/efficiency, as measured by output-per-manhour, increase the cost of production, reduce the volume of highly valued goods and services brought to market, increase our level of imports, and trap our member states at low growth rates, leaving each of our member states, without exception, operating far short of their full productive potential.
The distinguished guest lecturer does not have to look very far to see and observe incentive-driven compensation structures that have been working effectively in motivating work effort, and higher rates of productivity. Both the Canadian and US governments have in place incentive-based compensation plans. And, the majority of those who have fled our shores are, for the most part, gainfully employed under a pay-for-performance plan. Each of our member states has a ready pool of workers throughout the diaspora who have left our shores and are currently working in, or have worked under, a pay-for-performance plan. Many will be pleased to share their experiences in the design and implementation of these structures, for gratis.
The distinguished professor has provided much food for thought. The missing piece is the individual Incentive-driven Compensation Plan. We do not have to re-invent the wheel. Others have effectively addressed these productivity issues. Every US company of asset size greater than US $10 million is required to publish its Incentive-Based Compensation Plan in its SEC Form 10-K and DEF 14A filings.
If our region is to break out of the pack and accomplish the mission objectives most carefully outlined by the distinguished presenter, it must have in place a compensation and reward structure that motivates each of our workers to be innovative and creative in producing at their optimal performance level, thrusting our member states closer to their highest productive potential.