Incentives through Shared Ownership
Take two millers off a shift at a maize mill in Uganda and you won't make seven tons that day however good the manager is, and take the manager away instead and the place will be a mess within the week. Both of them are holding something up. Yet the manager might easily earn four times what a miller earns and hardly anyone would think that odd, because that's what managers get paid and that's what millers get paid, and if you ask the owner why they'll tell you they pay the market rate in roughly the tone you'd use to say you paid the going price for tomatoes. It sounds neutral. I don't think it is (and I should admit that for most of the eighteen years I've been running Cohere I didn't give it much thought either).
When we pay the market rate we're paying for two things and neither of them is what the person does for the business. The first is scarcity, because very few people in Uganda have the education and experience to run a mill, so the ones who do can ask for a premium (good luck to them). The second is bargaining power, or the lack of it, because there are far more people who need work than there are jobs and a miller who turns one down knows there are plenty of people behind him at the gate who won't, so millers end up paid less than they're worth to the business. None of that is anybody's fault. But it means that when we pay the market rate we're paying for the shortage of managers and the queue at the gate, and what either of them contributes barely comes into it. So is a miller worth a quarter of a manager?
Try taking every shilling the mill earns in a month and drawing a pie chart of who made it possible. The maize has to be bought at the right price from farmers who could sell elsewhere, milled without too much waste, bagged and sold before anybody gets paid, and at different times of the year each of those is the bit everything else is waiting on - the millers are in the middle of it every day. I don't know what the slices would come to (I'm not an economist and I'd be suspicious of anyone who claimed to know precisely) but I'd be surprised if you could draw it fairly and come out with the manager's slice four times the size of each miller's. I'd be less surprised if the manager's slice came out bigger, which is fine, and I'll come back to that.
The best reply to all this is that a miller is easier to replace than a manager, and it deserves a proper hearing. If you pay the manager less than the market she'll go to the mill down the road, and if you pay the millers well above it you're giving money away to people who would have done the job anyway, and a business that does too much of that won't be around long enough to pay anyone. That's true as far as it goes. But it's the market again. When we say a miller is easy to replace we're describing how desperate the next applicant is, and we're saying nothing at all about what this miller puts in, how well he knows the machines or whether he's the one who notices the screen is about to go before it does.
John Rawls, who I've been reading a lot of lately, asked what level of inequality you would accept if you didn't know which position you'd end up in. Imagine you're sixteen and you've been told you're joining the mill tomorrow but not which job you'll get. What would you want the manager to be paid? You'd probably be happy for the manager to earn more than you, as long as you could see the manager was the one making the whole operation work, including the bonus you share in. That's the condition. Pay differences seem fair when they follow contribution people can see, and they start to look like exploitation when it seems we're all slaving away for someone else while a well-paid boss shouts at us, and that's the point at which people stop believing anything the boss says about shared goals.
So what would a carrot look like that people believed in? I'd start with paying for contribution and not per market pressure. Above that the bonus pot could be split equally between everybody, the way tips get split in a decent restaurant, rather than a separate commission for each department. If production is behind the sales team has a reason to get stuck in and help bag flour, and if sales wants to cut the price by 50 shillings to move more stock the millers have a reason to cut the waste that makes it possible, and since the bottleneck moves through the year from procurement to production to sales, rewarding only one part of the chain never made much sense anyway. I'd also put a screen up in the office showing the day's sales and ring a bell for every one of them, so that everyone can watch the number move.
Leave, medical insurance and a pension all cost money too, but by paying for them you're telling people they're worth more to you than the market would force you to pay, which is the whole argument in three lines of a payslip.
None of this works if the people running the shifts see their job as standing over everyone else. In a mill the millers are the most important people in the building and everyone else, managers included, is there to support them, so a team leader's job is to fix the mill when it breaks and to ask the team what today's target should be. "Let's go for seven tons" is a very different conversation from "if we don't hit seven tons, you're working until midnight". And the target is more than a number on a screen, because a mill that makes money buys more maize from local farmers and sells more of a flour people across the region like to eat, which is a lot easier to get out of bed for than keeping the boss off your back.
The logic of incentives matters here. You can't ask people to move from working out of fear to working for shared goals while you're still paying them whatever the market says they're worth, because as long as someone knows they're putting up with hard conditions only because they have no other option, fear is still what gets them to work in the morning however kind their manager is (and plenty of managers are kind). People will only believe the carrot is a carrot once they feel they're being appreciated for their share of the pie.
