Where's the Money? (3)

Performance Bonus Programs represent a straightforward practice used to motivate performance, improve employee engagement and ameliorate a team’s compensation concerns while managing fixed salary expenses. Many times the decision to implement a bonus program is driven by the business leader, and the process of developing the plan involves financial modeling and a myopic focus aimed at solving a single problem, such as the need to improve sales or grow the customer base.

Seems simple enough! However, there are underlying principles that need to be thoroughly addressed if a bonus program is going to achieve the goals it is designed to achieve. If these elements are ignored in the initial decision-making you may find that your bonus program fails to achieve the desired results, creates unintended and unpleasant consequences—and you end up pouring your money down a rat hole.

Lesson #1: A bonus program will drive the behavior that is incented, therefore, be clear on how you structure the goals.

My first experience with this “fatal flaw” was with a sales organization in which the EVP of Sales launched a bonus program intended to increase sales. The fundamentals of the program were very simple: after a person sold 100% of their quota they would receive an incremental bonus payment in relation to the incremental improvement in sales. At first the program seemed to be working great —sales were growing, and in some locations, the numbers were stratospheric. However, in about six months the EVP started receiving data from the accounting department that sales cancellations and uncollectable accounts were also growing at an alarming rate—and in many cases correlated to the locations showing record sales.

The EVP turned to HR to help get the program back on track and I was assigned this task. While I won’t go into the details of my investigation, the bottom line was that the goals of the bonus program had not been thoroughly thought through and focused on one aspect of sales growth—writing new business. When setting the goals for a bonus program be sure that they not only drive the stated behavior, but do not encourage undesirable behaviors, as well.

Tips:

  • Ask yourself, “If the team only focus on doing “x”, what could go wrong?”
  • Align the bonus goals with other performance goals, as in “Increase sales over quota without increasing the cancellation rate.”
  • Keep the goals, simple, clear and measurable—remember S.M.A.R.T. goals.
  • Bonus goals should be strategic business drivers and be sustainable. Although they may need to be tweaked from time to time, if the direction is constantly changing, the bonus program will lose its credibility—fast.
  • Don’t have a laundry list. Keep a laser focus on what you want to accomplish and identify the 2-3 things that will make it happen.

Lesson #2: The goals and objective for which people are incented must be tracked and visible to people in real time or at least in frequent intervals.

My second bonus program nightmare comes from another organization that launched a bonus program for a team that was sort of a hybrid sales-relationship management operation. To the credit of the top executive, he hired a well-known consulting firm to design the program. They came up with a solid design along with two very important metrics that clearly drove revenue and a smaller percentage of the payout that was tied to personal KPIs.

I started working with this team one month before the first bonus payout was to be made. During that first meeting I learned that while the goals and metrics were clear the calculations were not shared with the employees until well after they’d received the bonus check. When the first payout was made, the employees were confused and disgruntled. Many people thought they had performed better than indicated by the amount received and there was a feeling that the bonus program was unfair and arbitrary, even a bit of a bait and switch.

The analytics team worked very hard for several more quarters to create a better and more visible tracking system for the team, but could never figure out a way to do that because there were too many variables involved in the calculation. Bonuses continued to be paid and people continued to be unhappy with them. At the end of the year I had a conversation with an employee who was leaving her role to take a position in another business unit, one that did not have a performance bonus program. She told me she was leaving because the other position paid more. Her statement puzzled me since I had the salary information for both positions. She currently made $80,000 and had received a bonus of $28,000 making her annual compensation $108,000. The new position paid $88,000 with a straight company bonus of 15% or total annual compensation of $101,200. I pointed out that she actually made more in her current position. She replied that the bonus didn’t count— to her it was “magic money”.

Tips:

  • Bonus programs drive performance when people can adjust their efforts to improve their results against their goals.
  • If people can’t see how they are performing against these goals they don’t have the ability to correct course and will not feel they control their earning potential.
  • If performance metrics are not visible to people, the program may lose credibility and people may start to view the bonuses as “magic money,” or worse.
  • If the organization does not have the ability to track metrics and make them visible and accessible to participants in the bonus plan—come up with a different compensation strategy.

A bonus plan is both a strategic business decision and a financial decision, but neither the strategic nor the financial goals will be met if you ignore the fundamentals of clear goals and clear communication. HR’s role is to make sure that the impact of a bonus plan is positive, motivating and in support of those strategic goals.


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Once your organization has gathered the feedback from the employee engagement survey, it’s time to focus on the critical components that ultimately determine the success or failure of the process: analyzing the survey results and following up with action plans. Together skillful analysis and targeted actions is what breathes life into the survey process.

Analyzing Engagement Survey Data

Simply stated, the goal of analyzing the survey data is to use the information to discover trends, truths and insights that are revealed through the employee feedback. In other words, the numbers will tell a story and it is the role of those involved in analyzing the results to find the story behind the numbers. A skilled interpreter will use their intuition and curiosity as well as sharp analytical skills to uncover the truth in the data and hidden opportunities. Here are a few tips that will help get you started.

1.         Whether you’re looking at total organizational results or the results of a specific group or department, you want to look at the data on three levels: the overall results, the broad categories (benefits, satisfaction with supervisor) and each individual question.

2.         If you have multiple department-level reports, it is helpful to compare and contrast them.

3.         Don’t rush the analysis. Allow yourself time to ruminate on the information.  Go back to the original goals of the survey and see how you fared. Look at the data from the perspective of your personal experience of the organization for results that don’t fit that perspective. If something doesn’t make sense look for the pattern that brings it into focus even if it means looking through a different lens.

The challenges of analysis can be demonstrated through an experience I had while working as the HR leader for a global, geographically-dispersed business team. During our first year we had great results—or so we thought at first. The engagement scores had improved from the previous year and were generally higher than the overall organization, and in most cases higher than the external benchmarks. The reports also indicated that most of the functional areas and the business leaders had above-average overall engagement scores. However, when I looked at the results from a geographical perspective, there were wide swings in satisfaction. I then conducted an analysis of my business team based on physical location rather than reporting structure. Boy, did the picture change! Once I turned the data around it became clear that employees felt less and less satisfied in the quality and quantity of communication they received and the resources available to them the further they worked from the corporate office. People in the US who were located in smaller or home offices away from corporate had lower engagement responses. The folks in Europe and APAC also had lower scores that followed the same declining trend when their physical location moved further from a “central office.” The light bulb went on: if we were going to create an effective global business we had to improve our communication and processes for employees who worked outside of the corporate office. This insight turned out to be low hanging fruit and we were able to implement meaningful action to address the issues in less than one year. We just had to uncover the need.

Action-Planning and Follow-up

Ultimately, the success and employee trust in the engagement survey process will be evaluated by the actions taken by top leadership. Note that I did not say by the “action plans, “ because the plans are useless if they are not translated into sustainable, meaningful actions. The golden rule for action planning is: “You must have an unwavering commitment from the top leadership down to meet your commitments.” Some experts are using the term impact planning instead of action planning, a change we wholeheartedly embrace.  We believe this slight change of reference puts the focus on the fact that the actions must translate into meaningful results.

The importance of the follow-up cannot be stated strongly enough, as shown in a Gallup study on employee engagement surveys. In the study they measured responses to the statement, “Action Plans from my last survey have had a positive impact on my workplace.” Companies who had a score in the top quartile reported an overall increase in engagement of 10% over the previous year. Conversely, companies who scored in the lowest quartile had a 3% decrease in overall engagement and no doubt experienced negative knock-on effects.

In addition to the “golden rule” here are a few tips on how to turn action planning into impact planning.

1.         Keep it simple, focused and committed. Identify the top 3-5 items to which the organization will commit and execute on them, flawlessly. Don’t commit to making a long list of changes. Evaluate what the organization can do and is willing to do.

2.         Get clarification on any feedback you don’t understand. For example, if the organization scored poorly in the area of communication, ensure that you understand exactly where people perceive the communication gaps and focus your action on closing those gaps.

3.         Designate an owner for each action item. Ensure the person has sufficient authority and resources to handle the task to ensure full accountability.  It may also be beneficial to create an employee team to work on the task. Consider adding performance and participation on the team to the goals for all team members.

4.         Once you have communicated the action plans, be sure to track the progress made and provide timely and periodic updates to the larger organization. Celebrate milestones whenever possible.

5.         Ensure that the actions you take link to business priorities and are stated as measurable goals. Remember: the goal of an engagement survey is not just to get better score next time! The actions you take should have clear objective, metrics to measure success and tie to the organization’s business in a meaningful way.

 


Customer Service-Smile-Headset

I must confess that when employee engagement surveys started to become popular, I was skeptical about their value. I chalked them up as another passing fad that created lots of sizzle, but little substance.

As luck would have it, I joined an organization just as they were launching their annual survey process and I had the responsibility to lead the process for my business units. Since I was new to the company and this would be one of my debut projects, I had to replace my skepticism with a determination to ensure that the survey process contributed high value and high impact for my client leaders and their teams.

It worked! I am now convinced that employee engagement surveys can be an excellent tool to gather relevant data about how employees feel about their organizations. ­­But the potency of the process is not in gathering the information or even understanding the results—the heart of the process is translating the information into meaningful action. Employee engagement surveys will only make a difference for your organization if you support them with realistic action plans to which leaders are held accountable.

The use of the employee engagement survey is a fairly common practice for many organizations. This is no surprise, since the link between employee engagement and company performance is well established. According to Gallup, companies with highly engaged employees have 3.9 times the earnings per share (EPS) growth rate compared to those with low engagement scores. Yet there is no common agreement on many aspects of the process, what to measure or even the definition of engagement. However, there are some guiding principles that will greatly enhance the effectiveness and value of using engagement surveys.

Guiding Principles

Confidentiality and Anonymity: People must be able to complete the surveys anonymously without exception. Use a third party to distribute and collect the surveys and to compile the data. Remember the power of engagement surveys is to obtain candid, unfiltered feedback, which is easier to gather when employees aren’t concerned about being identified.

Leadership Commitment: Be absolutely certain that the leaders from the top executive down support the survey process.  This means that:

  • You must clarify how the leaders define engagement and what they want to measure. Identify any issues on which they do not want to solicit feedback. A general rule of thumb is never ask a question when you don’t intend to address the issue.
  • Leadership must be open to “listening” to the feedback, be willing to communicate the results (both positive and negative) and translate those results into action. There may be situations when the organization does not choose to act upon specific feedback, but the reasons for those decisions should be honestly communicated.

Timing: There are three primary considerations when it comes to timing:

  • First, talk to your business leaders to evaluate the “rhythm of the business. “ Are there segments of time when a significant number of people will be out of the office, when key product launch deadlines or tradeshows are looming, or other events that will impact participation? Schedule a time that is best suited to your business cycle.
  • Second, look at the HR calendar. No one wants to be inundated by HR initiatives, and you don’t want to overload your team. Avoid scheduling the engagement survey on the heels of other significant HR work.
  • Don’t assume that you have to conduct a survey every year. The real value of the process comes from employees trusting that their organization is listening to and acting upon their feedback. It is far more effective to space the surveys at intervals that allow the organization time to have great follow-up, than to rush through actions to meet the next year’s survey deadline. An annual survey may work for some organizations, but eighteen to twenty-four months is the guideline I prefer.

Identify the Employee Groups: While this may seem obvious, it may require some thought. Remove contractors from the distribution (including contractors in an engagement survey may jeopardize their non-employee status). Are there specific business units or categories of employees that are too different from the overall organization and should be handled differently? Once you have identified the people to be surveyed make sure everyone receives a survey—even if it means using different delivery methods.

Designing or Selecting the Right Survey: Now that you have the basics sorted out, you are ready to make the decisions about the survey content. Whether you design the survey in-house, select a product off the shelf or hire a survey company will depend on several factors, such as the size and complexity of the organization; internal skills, resources and budget; the need for language translation; in-house availability of people trained in survey development and similar issues. One consideration that is often overlooked in the decision process is the need for benchmarking. Regardless of what survey form you use, you will want to include a number of core questions that you will use in subsequent surveys. These core questions will become your internal benchmarks to monitor long-term trends.

Some organizations may also place a premium on external benchmarking in key areas. If this is the case, you will be best served to hire a vendor who specializes in employee engagement surveys. They will be able to provide core questions and results from other organizations that you can use for external benchmarking. If you are interested in external benchmarking, be sure you define the kinds of organizations against whom you want to be compared and select a vendor that can give you that data.

Next week we will take a look at finding the “hidden gems” as you review the survey results and the all-important Action Planning process.


champagne on iceWhat is the purpose of employee recognition? It is to express appreciation for and validation of a person’s extraordinary contribution, extra effort or other accomplishment above and beyond the daily expectations. This is a simple concept. After all, one of the first things we teach our children is to say, “Thank you,” to others. So why, is showing appreciation or saying, “Thank you” so difficult in organizations? I believe the answer is that many organizations focus on implementing Employee Recognition programs instead of working to create a culture of high performance standards and sincere appreciation. And, since most of the programs are designed, implemented and managed by the Human Resources department, all too often the action being recognized and the moment of recognition becomes diminished by red tape, committee review, final approvals and the passage of time.

One of the most mind-numbing meetings that I have ever attended was a presentation by a Director of HR at one of my former employers. She had been leading a task force comprised of managers, HR Business Partners and employee representatives throughout the company to create a new Employee Recognition Program. While I don’t remember the details of the program, I vividly remember the two-hour meeting in which the team talked about their proposal. I sat there as they reviewed detailed categories of the types of things employees could do to merit recognition and how the various contributions aligned to certain levels of recognition in the program. This was followed by pages of guidelines that defined who was qualified to be recognized and how often; the specific categories of allowable recognition; and how it was all going to be managed and monitored to ensure the program wasn’t abused. I remember thinking, “Geez, employee recognition should be a lot more fun! It should be a heart felt “thank you” to the person receiving the recognition. Recognition should create a buzz that inspires others, not be one big blob of bureaucratic red tape!” My mind drifted to the words, “Encouraging the Heart,” which is how Kouzes and Posner describe employee recognition in their book, The Leadership Challenge. This program had no heart! I left the meeting depressed.

As life’s lessons often go, I walked straight from that meeting to my monthly one-on-one with the SVP of Product Development. One of the topics he wanted to talk about was a special recognition bonus for an employee who had just completed a complex project that was of great value to the company. He was seeking my support to recommend a large spot bonus cash award. Given the details of her work and contribution there was no question the award would have been approved, and I told him that. However, I was still thinking about meaningful recognition, so I suggested a different approach. Drawing on the principles of “Encouraging the Heart,” I saw this as an opportunity for the leader to really do something special, something personal, something that would have greater impact than a check. So I helped the manager brainstorm some other ideas that might have more of a wow-factor. I asked him what the employee liked to do and he said she was an avid hiker. I thought we were on to something, so I suggested he do something along those lines. In the end we agreed to give the employee an extra day off for a long weekend and a significant gift card to a local sports store. He really embraced the idea and off he went.

The following week I received a visit from the manager who was brimming with excitement. The employee had been deeply moved by the personal recognition. She had told him it was the most meaningful “thank you” message she had received in her career, even though she had been the recipient of many cash bonuses in the past. Furthermore, the impact of that personal and heartfelt recognition stayed with her through the years. She went on to be one of our top managers and carried that same level of thoughtfulness as she led her teams. (By the way, the final cost for this personal recognition was less than one-tenth of the amount the SVP original wanted to pay in the cash bonus—a win-win).

I have since used this approach many times with my own teams, or when designing organizational recognition guidelines and coaching leaders. It’s simple, it’s meaningful and it is often more impactful than cash. Why? Because personal recognition is sincere. It demonstrates to the employee that their unique contribution deserves unique appreciation and that you have invested some thought to make the moment special.

Of course, there are other aspects to developing a culture of appreciation, and there are budget, guidelines and governance issues that always need to be considered. But you will never go wrong if you remember the following tip: “While recognition programs and similar organizational rituals have their place, the best encouragement is always given personally, according to the individual’s own value system. Find out what your direct reports, leaders and peers find meaningful and recognize each individual accordingly.”


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Once the senior leader feels confident that he or she is clear about the purpose and goals for a Skip Level Meeting and is satisfied that the participants have the requisite level of trust, it is time to move forward. Whether you use an internal facilitator (your HR partner) or external facilitator (if you feel the meeting may be difficult or the HR partner lacks facilitation experience), the following steps will ensure you have a well-organized, focused and effective experience.

NOTE: These steps are accomplished by the leader and HR partner working in tandem unless otherwise noted.

1.  Review the process with the skipped leader if you have not already done so. This is critically important, especially if you value transparency and trust. By talking with the skipped leader before invitations are sent to employees the senior leader is able to:

  • Ensure that the manager understands the purpose of the meeting.
  • Clarify what the manager’s role is and is not in the process and follow-up.
  • Gain the manager’s support of the process, which will encourage employee participation.

2. Develop and review the questions you want to ask.

  • Brainstorm a list of questions or issues.
  • Estimate the time you believe each question and the discussion might take.
  • Review the list and prioritize. You want to have a manageable number of questions so that the meeting doesn’t go on too long (60-90 minutes is a good range to work with).
  • Eliminate any questions that you are not willing or able to address.

3. Determine the meeting logistics (who, when, duration, place).

4.  Have the senior leader invite employees to the meeting. The invitation needs to come from the meeting leader, not HR or the facilitator. Describe the goals, process and logistics in the invitation.

5. Prepare any meeting materials.

6. Conduct the meeting(s).

  • Briefly review the goals and the steps, then ask your first question.
  • Record all input and feedback in real time. You’ll need accurately recorded data for the next stage. This task can be handled by the HR partner or facilitator.
  • Allow sufficient time at the end of the meeting to summarize the feedback to identify main themes that have emerged. Allow the group or individual to provide input and/or corrections as you synthesize the information into themes or topics.

7. Review the rough synthesis of the meeting, develop a clean summary and identify the key themes you want to cover with the skipped leader.

8. Debrief with the skipped manager and jointly create a plan of action to address any issues. Structure the de-brief in a simple “What’s going well” and “What could be better” format. A good Skip Level Meeting process allows both the leader and skipped manager to learn how they both impact the team. The senior leader needs to communicate a willingness to accept responsibility for his or her contribution to any negative outcomes, and encourage the skipped leader to do the same. This meeting may or may not be facilitated, depending on the outcome.

9. The senior leader then follows up with employees to review the action plan and to thank them for their participation. Follow up periodically to ensure the action plan is on track.

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