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Rewarding Excellence, by Edward E. Lawler, III. San Francisco: Jossey-Bass, 2000.
As Pfeffer (1994) argued some years ago, it is not the selection of products, the identification of markets, or the management of supplier relations that determines long-run competitive advantage but the management of people at all levels within the organization. In his new book, Rewarding Excellence, Lawler echoes this sentiment by strongly arguing that strategic success rests on how well the firm's reward structures support the firm's strategic intent. His thesis is that, with few exceptions, firms desiring to develop core competencies from which sustainable competitive advantages emerge must focus on attracting, developing, motivating, and retaining what he calls "excellent" employees, where excellence is defined in terms of performance in the pursuit of the firm's strategic objectives. The basis for this call to reconsider reward structures, and the employment relation in general, is the growing awareness that changes in the larger environment are forcing organizations to utilize their human resources more effectively.
Lawler makes several points about how the growth of knowledge and information technology and the increasing globalization of labor and capital markets have greatly increased performance pressures on organizations. For example, he suggests that improved information technology has increased buyer power by providing buyers with more information and greater access to a wider set of suppliers. More important, however, is the globalization of capital markets that are allowing for easier transfer of capital across international boundaries. This ease of transfer gives investors greater power in demanding stronger and more secure performance from their investments.
In addition, the growth of information technology has given organizations the ability to tap into labor markets on a global scale through improved coordination and control mechanisms. This globalization of labor has increased the number of firms competing for excellent employees, especially in knowledge-intensive industries. Paralleling this change is evidence Lawler offers of shortages in the supply of executive talent due to increased demand by smaller firms able to offer tremendous growth potential. The major implication drawn from these changes is that firms must shift from organization through control to organization through incentives, where incentives are tied to employee contributions toward value creation. Organizations that embrace this shift can create competitive advantage through how effectively they organize human...