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I recently did some research on the demise of the functional organization and the associated increase of unstable jobs and obsolescence of job-based forms of pay, as advocated by some of the leading compensation thinkers. I found that the leading thinkers in organization design do not subscribe to this theory. On the contrary, experts such as Michael Hammer, the father of the process-centered organization, and Jay Galbraith, see an important role for the functional organization as the primary organizational form, or as the foundation or parent in a multi-structured company, in which it provides stability, strategy, specialized expertise and a counterbalance to the task force structure.

It also serves as the home base for employees who work on task forces to ensure they retain their professional roots and to improve specialized knowledge and skills. Although task force participation may require additional skills, such as project management and team building, employees are still assigned to one based on their functional expertise. Thus, for most people, a new system for classifying and paying employees, such as skill-based pay, is not necessary, as claimed by the compensation experts.


AB - Frank, as always I appreciate your bringing your experience and knowledge to bear on these topics. I do agree that there is probably always going to be an important role for the functional organization to play - but it will change over time and likely in ways that we can't easily see in advance. To the extent that employees are aligned with an organization, I also agree that many of the fundamental compensation management tools we have today (like salary ranges and/or bands) will apply to the nature of "wiki work" in these future organizations. However, I concur with the authors of Wikinomics that the relative proportion of "freelance-types" to "employees" will continue to shift over time, and that we will increasingly see more of the first group and less of the second. I am observing this happening even today, in the marketplace where I do business.

I can't resist - though - a quick swipe at Michael Hammer's credentials for predicting future organizational trends and their implications; the last book of his that I read (Leading the Revolution) dedicated many pages to singing the praises of Enron as a model company for the age of innovation and reinvention. So I am inclined to take his thinking with a grain of salt!


I cited Michael Hammer not because of his predictions about the future, but because of his experience consulting with the process organization. He's not a futurist.

Enron's fall has been attributable to the corrupton of their executives, auditors, lawyers, and investment bankers, not with their organizational model.

Funny thing---the rise of the freelance group has been predicted for over ten years, but its growth has not met the predictions, as shown by these facts:

•Independent contractors, on-call, temporary help, and workers provided by contract firms, comprise just 10.7 percent of the workforce (14.6 million), up slightly from 9.9 percent from 1995 (12.1 million) (Bureau of Labor Statistics 1995 and 2005).

• Contingent workers are not represented strongly in two Information Age occupations only 5.6 percent of computer programmers and system analysts were self-employed in 2004 (Bureau of Labor Statistics 2006).

• Intel and EDS, examples of firms organized according to flexible new economy principles (Bridges 1994), eliminated tens of thousands of permanent jobs in the past five years, but made no mention of being able to minimize the impact by contracting the size of the contingent labor pool (Intel Corporation 2006; N.Y. Times 1999).


AB - Interesting data - thanks for sharing it here. As always, you are the voice of clear and reasoned thinking - supported by a sound command of the facts.

Its difficult to argue with the data, particularly that of BLS, but I can't help thinking (and I admit that I may be biased based on the seat from which I view the world) that there is tremendous growth happening in the sector that represents people - like me - who are in small businesses (1-5 people), rather than functioning as freelancers per se, and that is missing from those numbers.

At any rate, I appreciate your continued comments! Lots to ponder!

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About The Author

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    Compensation consultant Ann Bares is the Managing Partner of Altura Consulting Group. Ann has more than 20 years of experience consulting with organizations in the areas of compensation and performance management.

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