Managers in the new economy must become purchasing agents -- purchasing the added value (concrete results) of individual contributors daily in exchange for compensation. Just as purchasing agents must negotiate with vendors, managers must learn to negotiate with employees. Employees can be expected to drive a hard bargain -- and so should managers. The market will dictate acceptable terms in each case.

Make a short-term pay-for-performance deal with every employee on every project. Pay for results delivered by specific deadlines, instead of by the hour, and cash employees out when they deliver. But go beyond salaries, hourly wages and traditional benefits by expanding your repertoire of rewards -- financial, quasi-financial, and non-financial. Every resource an employer can make available to employees should be positioned as an incentive for performance.

Managers often complain that today's employees are too demanding:
- "This one wants Thursdays off."
- "That one wants her own office."
- "This one wants to bring his dog to work."
- "This one wants to have dinner with the senior VP."
And so on. But managers are wrong to complain. When a manager discovers the wants and needs of an individual contributor, the manager has found a needle in a haystack. Different people are motivated by very different incentives. Too often managers never find out exactly which rewards the people they manage want most and are, therefore, willing to work hardest to earn. In some cases, the desired rewards are so idiosyncratic, a manager wouldn’t guess in a million years if the employee didn't offer clues. And even when managers get the clues and find out what their employees want, managers often disregard the desired rewards as unreasonable or unrealistic. A better strategy is to use the discovery of desired rewards as an opportunity to motivate individual contributors with uniquely attractive incentives. Use the desired rewards as bargaining chips in the "purchasing agent" negotiation for added value.
- "You want Thursdays off? I’m glad to know that. Here's what I need from you."
- "You want your own office? OK. Here’s what I need from you."
- "You want to bring your dog to work? Great. Here’s what I need from you."
- "You want to have dinner with the senior VP? Fine. Here’s what I need from you."

It should be noted that the issue of fairness often comes up when discussing differential rewards for high performers. So let me offer a way to think about fairness: There is nothing that could be less fair than rewarding high performers and low performers the same. Compensating high performers at a higher rate is not only fair, it's the only fair way.
 

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