Coming soon · Technical Reference
Rewarding Excellence: Pay Strategies for the New Economy
In the new economy where human capital is the chief source of competitive advantage, organizations must abandon traditional job- and seniority-based pay in favor of reward systems that pay the person, reward excellence, and tie compensation to performance.
This is a hands-on technical/engineering book — we're building it into Stepcode (tool-by-tool how-to), with a profile to follow.
What it’s about
Rewarding Excellence makes the case that in a globalized, knowledge-driven economy, an organization's reward system is one of its most powerful—and most underused—levers for competitive advantage. Drawing on four decades of research, Edward E. Lawler III shows why traditional bureaucratic pay practices that reward jobs, seniority, and hierarchy fail in today's environment, and lays out a blueprint for reward systems that attract, retain, develop, and motivate excellent individuals. Treating employees as human capital investors rather than job holders, the book details how to pay people for their skills and knowledge, how to design pay-for-performance systems that actually motivate, how to conduct meaningful performance appraisals, and how to reward individuals, teams, and whole organizations. It offers practical guidance on team-based pay, 360-degree appraisals, stock options, gainsharing, goalsharing, and skill-based pay—and shows how to align all of them with business strategy to create high-performance organizations.
The through-line
- Who it’s for
- A manager, HR leader, or executive who wants to design and manage a reward system that gives their organization a competitive advantage by attracting, retaining, and motivating excellent people.
- The problem
- Traditional job-based, seniority-based, and merit-pay systems no longer attract, retain, or motivate the talent needed to compete in the global knowledge economy. The reader feels their pay practices are outdated, ineffective, and disconnected from strategy, leaving them unsure how to reward excellence without wasting money or creating dissatisfaction.
- The plan
- Adopt the new logic of organizing and recognize human capital as your source of competitive advantage.
- Make the key structural and process design choices for your reward system, aligning them with strategy.
- Pay the person—reward skills, knowledge, and market value—rather than the job or seniority.
- Design pay-for-performance systems with significant variable pay, objective measures, and clear line of sight.
- Reward individuals, teams, and the organization appropriately, supported by effective performance appraisal.
- The payoff
- The organization attracts, retains, and motivates excellent people who provide a sustainable competitive advantage. · Pay is clearly tied to performance and skill development, creating a high-performance, high-trust culture. · Reward systems are aligned with strategy, structure, and people, contributing directly to organizational effectiveness.
See our guide
- Compensation Analyst →
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- Design A Compensation System →
- Do Human Resources And People Management Well →
- HR Business Partner →
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- Learning & Development Specialist →
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- Recruiter / Talent Acquisition →
- Recruiter / Talent Acquisition →
- Recruiter / Talent Acquisition →
- Design Short-Term Incentive And Variable Pay →
Related profiles we’ve built
- An Everyone Culture: Becoming a Deliberately Developmental Organization →
- Apa Handbook Io V2 →
- Applied Psychology in Human Resource Management →
- Armstrong’s Handbook of Strategic Human Resource Management →
- Beyond Hr Boudreau Ramstad →
- Antifragile (Incerto) →
- Compensating Your Employees Fairly →
- Coaching for Leadership - The Practice of Leadership Coaching from the Worlds Greatest Coaches (J-B US non-Franchise… →
Additional reading
- Immunity to Change: How to Overcome It and Unlock Potential in Yourself and Your Organization · Robert Kegan and Lisa Laskow Lahey
This is the authors' previous book, which provides a deep dive into the ITC framework that is presented as a key tool in Chapter 6 and used by the fledgling DDOs in Chapter 7.
- In Over Our Heads: The Mental Demands of Modern Life · Robert Kegan
This book lays out the foundational theory of adult development and mental complexity that underpins the entire DDO concept, explaining the 'adaptive gap' that DDOs are designed to address.
- Mindset: The New Psychology of Success · Carol Dweck
The book explicitly references Dweck's work, contrasting the 'fixed mindset' (prevalent in ordinary organizations) with the 'growth mindset' that is fundamental to a DDO's culture.
- Organizational Culture and Leadership · Edgar H. Schein
Mentioned in the book, Schein's work provides a foundational understanding of organizational culture, which is the primary medium through which DDOs operate.
- The Functions of the Executive · Chester Barnard (1938)
Chapter 10 identifies this book as providing the seminal concept of 'willingness to contribute to the cooperative system,' which forms the theoretical foundation for the modern construct of Organizational Citizenship Behavior (OCB).
- The Psychology of Careers · Donald E. Super (1957)
Chapter 3 cites this as a foundational work that established the concept of career stages, a model that has profoundly influenced career development theory and research for decades.
- Decision-making in the employment interview · E. C. Webster (1964)
Chapter 6 highlights this as the key report from the influential McGill University studies, which revealed the cognitive biases inherent in unstructured interviews and shifted the focus of research toward understanding the interviewer's decision process.
- Principles for the Validation and Use of Personnel Selection Procedures · Society for Industrial and Organizational Psychology (SIOP)
Multiple chapters (e.g., 13, 15) refer to this document and the related AERA/APA/NCME 'Standards' as the authoritative professional guidelines that define best practices and core concepts, like the modern unitarian view of validity, for the entire field of personnel selection.
- Managing Human Assets · Beer, M. et al. (1984)
This is a seminal book that introduced the 'Harvard framework' of HRM, emphasizing a multi-stakeholder approach that considers the interests of employees, not just shareholders. It provides a foundational 'soft' HRM perspective.
- Strategic Human Resource Management · Fombrun, C. J., Tichy, N. M. and Devanna, M. A. (1984)
This book introduced the 'Michigan framework,' which advocated for a 'hard' HRM approach focused on tightly matching HR strategy to the business strategy (vertical fit). It is a foundational text for the strategic alignment concept.