The subject of motivating staff is big and how to compensate is even bigger. Now at the end of the year most companies have reviewed their goals and plans. This is also when objectives for bonuses are set and that is a subject many customers ask me about. I thought I would thus share my thoughts on the topic.
How I used to do it… and failed.
I must confess that I have formed my opinion by failing over and over again. So this is how I used to do it. It made total sense to me that you would pay people more if they perform well. That’s only fair. But how do you exactly measure someone’s performance? Well, that is when I used to create spreadsheets listing projects with specific, measurable, achievable, relevant and timed (SMART) outcomes. We agreed that if the project would achieve x in a year’s time, the employee would get y in return. To create this document took me quite a bit of time.
Months later it was time to review these objectives in order to calculate the payout for the employee. But no, we couldn’t use these figures. In the meantime a big client had gone bankrupt and affected all numbers, a new competitor had got ranging for the product line, we had changed direction, the colleague that was supposed to do the other part of the project had left or the currency had dramatically changed. All factors that the employee had no control over. The employee felt that the results did not reflect their input or success. I thus had to make a call on how to judge the situation, but my judgement was obviously subjective and up for debate. The bonus ended up not motivating the employee regardless of whether he or she agreed with my conclusion. It all felt meaningless. I felt that the objective setting was bad on my behalf since I didn’t consider all these factors, so in the next round I tried even harder. The reality is that it is close to impossible to isolate one person’s performance in the team and the wider environment, except for very manual and repetitive tasks.
After failing using this method, I have come to like to two following approaches:
1) Spontaneous rewards. Imagine an employee has really gone the extra mile with something and achieved great success with it. It could be in closing a deal, designing a product, completing a plan, getting buy in from staff or whatever really. There and then when the employee is feeling the victory, approach him or her and describe your pleasure with what you observed. “I really liked your dedication and how you applied your creative thinking. The results of xyz are great. Thank you very much for your great work, and by the way check your bank account tonight. We have transferred into your account as a sign of appreciation… or take your family out for dinner on us… or take the rest of the week off… or here is a voucher to your favourite shop or spa”. That way the reward is linked directly to a desired behaviour and is instant. You also don’t build up an expectation that at the end of each project or quarter there is a review that might give the employee extra income. This approach is obviously very much led by the manager and relies on him or her picking the right and relevant moments.
2) Use the bottom line as a measurement. If we make money, you get money. If we don’t, you wont get any. My previously described and unsuccessful method assumes that the employee doesn’t understand how to contribute to the bottom line of the company. Can you simplify your reporting to help him or her understand the business? Can you increase your transparency? Can you decrease the unit size of the company, so that the results are clearer for each unit?
I would love to hear success stories on the subject, so please drop me a mail if you have one to share.
Please watch the enclosed video, which explains the subject well…. Enjoy.