Hammers, Nails and Compensation Biases
Workspan Daily
May 05, 2022

Editor’s Note: Workspan Daily will be reproducing a monthly Compensation Café blog post for the benefit of our readers and to encourage further discourse on topics vital to compensation professionals. New to WorldatWork? Please feel free to join the discussion in our new online community, Engage, or send your thoughts to workspan@worldatwork.org.

It's called the law of the instrument. The concept is said to have originated with philosopher Abraham Kaplan, who said “I call it the law of the instrument, and it may be formulated as follows: Give a small boy a hammer, and he will find that everything he encounters needs pounding.”  

The more popular version comes from Abraham Maslow's The Psychology of Science (1966) and is typically presented as "If all you have is a hammer, every problem looks like a nail."

Sound familiar? It ought to. The law of the instrument is alive and well in the field of compensation, compliments of the biases we all hold.

Let's start with the more general bias, that compensation is the fix for every organizational challenge. Turnover an issue? Pay them more! Engagement a problem? Pay them more!  Employees not meeting performance standards? Put in an incentive plan (a.k.a. pay them more ... but on a variable basis!)

Never mind taking the time to understand and clearly define the problem so that we can ascertain the best solution. Pound that hammer and move on!

Sometimes the general bias is ours. Whether through lack or experience, maturity or confidence, we simply respond to situations with the tool we have most readily available. Other times, we encounter bias in the leaders we are trying to serve or advise. They want the quick fix; they don't want some HR or compensation professional digging around in their area for information or answers. Backs up against the wall, we give them what they want.  And when it doesn't work, they rail against us for our lousy pay plan, which fails to fix a problem that had nothing to do with money in the first place.

Then, there are the more specific biases we have toward a particular compensation approach or choice, either because we've had great success with it in the past or just because we find it intellectually appealing. It may be a particular affection for broadbands, for group incentives or for skill-based pay.   

It may be a specific metric that we believe belongs in every sales compensation plan, regardless of the circumstances. It may even be that we think 360-degree feedback is always the right, or always the wrong thing to do. It may be a smaller, more finely tuned hammer, but we swing it just as indiscriminately.

The bottom line is, we all have our biases. The trick is to be aware of them, be open to understanding the unique business and people reality in every organizational challenge and be willing to explore other possibilities beyond pounding something with our favorite hammer.

This article was first published at Compensation Café on April, 27, 2022. 

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