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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Where organizational change begins.

Traditional organizational development is based on the theory that organizations are systems. Therefore, to change an organization, you analyze what’s going wrong in the system and recommend appropriate changes to restore the system to health and balance. Edgar Schein and Peter Senge love this approach.

I’ve always thought that the theory was bogus. In one sense, organizations are systems—or at least you can choose to look it them that way. Sometimes that’s helpful, like when you’re process mapping or trying to figure out why your compensation system is accidentally rewarding the wrong things. As a temporary problem-solving tool, looking at an organization as a system is useful when applied to processes.

In traditional systems-thinking OD, the role of change agent is fix-it person. That approach may change the system but it never changes the people. I’ve never had an experience with a fix-it person that I found personally transformational, whether it’s with the car repair tech or a plumber. They change the oil or they fix the leaky pipes, and while that removes a source of anxiety for me, it doesn’t change me in the least. So why would we think that a fix-it person approach could transform an organization?

The problem with the systems approach is that organizations are full of those inconveniences we call human beings, and you can’t really change a culture by simply perfecting its systems, practices, processes and procedures. You have to change the human beings—or, more accurately, you have to get the human beings in the organization to want to change themselves.

Alternative OD takes a completely different view that I have found to be far more effective because it allows the change agent to appeal to the higher level needs in people rather than the lower level needs associated with organizational processes. Most people go into an organization with the need to be effective, to demonstrate competence, to feel like their work matters. Focusing on organizational process and bureaucracy may be superficially helpful but it doesn’t come close to satisfying the needs of most, so the change agent winds up fixing things and wondering why the people are still the same. The reason is that by looking at an organization through a systems lens, you essentially devalue the people: they’re just system components.

I don’t know about you, but I don’t feel my destiny is to be a component.

Alternative OD starts from a completely different perspective: it believes that all organizational change starts with the self, not the system:

We can never forget that in trying to change an organization, we are acting from the self. We therefore need to be willing to engage the self in self-exploration because it is fundamental to acquiring the self-reflexive insight that is a prerequisite to the development of a more viable organization.

Organizations are human creations. We lose sight of that by focusing on structures, on job descriptions, on process, on rules. You can change all of those aspects of an organization and nothing really changes at the core. That is why transformational change begins with self: it is the only authentic source for change.

It is therefore important that we not only understand the social order but the person, and we cannot understand the person without self-understanding. Only through these understandings can we hope to make changes to organizations and improve collective effectiveness. We need to call into question our understanding of organizations and provide a reflexive critique of meaning of the relationship between the person and the social reality from which our experience of organizations emerges.

Even if you’re a traditional systems-thinking OD practitioner, this approach elevates your role to something far more important than handyman or handy-woman. If you’re authentic, you’re honest; if you’re honest with self and others, you have no hidden agenda; and you can begin to engage people in meaningful dialogue that just might get them to talk about the thing they’re trying to protect—the thing that serves as their primary reason for resisting change.

It also helps you avoid the ethical trap that ensnares most change agents: working on something you know isn’t really going to change things but might make things a little better and allow you to pay your bills. If you truly work on self-awareness and authenticity, you’ll be much more likely to make an honest assessment of the desire of the people in the organization to engage in a real change effort, and rather than waste your time, energy and spirit with people who don’t want to change, you’ll have the confidence to move on to something more fulfilling and meaningful.

Quote source: Notes for upcoming book on organizational development.


Is this what you want?

Is this what you want?

Let’s face it: the recruiting and selection process in most organizations is hardly a shining example of open and honest communication. Candidates naturally avoid revealing too much truthful but negative information and organizations often soft-pedal unpleasant realities (or are completely blind to their many deficiencies). You might look at places like Glass Door to see what employees are saying about the organization, but the information posted there can range from messages from those who have drunk the Kool-Aid or comments by those with serious hidden agendas.

The best way to evaluate whether or not a workplace is worthy of your sacrifice is to ask direct questions of the people interviewing you and listen to both the content of the answer and the way they answer it. As total honesty is often rare in an interview process, you will know when you’ve heard it. When you hear dissembling, stuttering or avoiding the question entirely, it’s a very bad sign.

Here are some questions you can use to help you get more of the truth about what it’s really like to work there:

  • How much time and energy do you expect me to contribute to be successful on this job? (If you get “Whatever it takes,” press for a specific hours-per-week figure.)
  • What are the priorities of this organization right now? Of the workgroup? (Check those against the mission statement for a disconnection.)
  • What kind of support does this organization give its people in terms of technology, training and career movement? (Listen for what they’re actually doing, not what they’d like to do.)
  • What kind of people do you want working here? (Listen for underlying sexism, racism or other kinds of bias.)
  • What kind of people do you not want working here? (Same as above.)
  • How do you see me contributing to this company? How do you see me making a difference?
  • Is it possible for me to interview with the people I will be working with? (If they decline, that’s a big red flag.)
  • What other commitments beyond an honest day’s work do I need to make to achieve success here? (After-hours engagements, checking email at midnight, learning to play golf, etc.)

For your supervisor, try these questions:

  • Tell me what your hot buttons are. (This will reveal their true values.)
  • Tell me about the leader you worked for that you admired the most. (This will tell you about the kind of leader they see as a model.)
  • Tell me about a problem employee you had and why that person was a problem. (This will reveal any biases and blind spots.)
  • Now tell me about a great employee you’ve had and what made them great. (If you can’t get more than a general answer, that’s a very bad sign.)

Although it’s tough to turn down a job when you need the money, the truth is we often settle for jobs we don’t want because the job search has drained our confidence. You can’t let that happen. If you find your confidence sagging, review your resume and remind yourself of all the times that you have delivered great results. Whatever you do, don’t settle for a job in an organization that simply isn’t worthy of your time, energy and talent.


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If you ask people what they love most about their job, they’ll frequently say, “The people I work with.” If you ask people what they dislike most about their job, they’ll frequently say, “The people I work with.”

Most people who dislike the people they work with rarely do anything about it beyond trying to tune them out or avoid them whenever possible. This is a lousy strategy that doesn’t improve anything and encourages people to internalize stress. Instead of honest interactions, we have people playing games with each other. Avoidance of others may be a decent short-term strategy if you’re trying to get out of a dysfunctional organization unable to change, but it’s a poor choice if you have any hope of workplace happiness.

In Working Choices, I wrote about our three basic human responsibilities: responsibility to self, responsibility to others and responsibility to the community. Let’s look at what that middle responsibility means.

Responsibility to others is all about your relationships and doing the things you need to do to keep them healthy. There are five fundamental actions related to this responsibility:

Seek the true self: Many people enter relationships based on their personal expectations of what they want the other person to be. This is obviously true in many romantic encounters, but also applies to the workplace, where we heap expectations on leaders and co-workers as to how they should behave. Such a perspective is inherently unfair and invariably disappointing, because no one is here on this earth to live up to our expectations. To be truly responsible to others, we must release others from our expectations and establish a space where people are encouraged to be natural. This also validates and supports the self-responsible action of self-development, in that by letting go of our projections, we learn more about others and therefore ourselves.

Respect for Choices: Along with seeking the real person behind the expectations, it is necessary to learn to accept another person’s right to choose. This does not mean that if someone chooses to shoot you that you should let them go ahead and do it, for you would be violating your overriding responsibility to yourself. What it means is that you allow people the right to make choices and mistakes, just as you permit yourself the right to make similar choices (and similar mistakes). It also means practicing tolerance for choices that may not fit with your particular tastes, but as long as a choice brings no harm to another, you cannot interfere. It is up to the person making the decision to judge whether or not a choice will result in harm to him or herself.

Offering Assistance with Choices: All of us need help in sorting out choices. Sometimes we miss potential consequences or fail to take certain variables into account. We can help others by sharing information and by listening to their thinking. Sharing information and listening without bias are probably the two greatest gifts we can give someone who is facing a difficult choice. Keep in mind that assistance does not involve giving advice or finding other sneaky ways to try to force them to live up to your expectations. It means being there for them, not for you.

Defining Your Parameters: It is important to be fair to others, and being fair often involves explaining to another person your own personal limitations. You have to let people know what values are important to you so they can make choices as to how to relate to you. It is not fair to another person for you to withhold values and feelings when withholding that information could lead them to make unwise choices about how they interact with you.

Forgiveness: Just as we need to learn to forgive ourselves, we need to avoid beating up other human beings who engage in the ultimate human experience of screwing up. Your parameters will determine how much you can forgive, which is why it is wise to let the people close to you know just how far your tolerance goes. It is also possible to forgive someone while at the same time deciding that you really don’t think it’s a good idea to maintain the relationship. In this case, forgiving another is important for you in terms of letting go as it is for the other in terms of receiving permission to attempt change.

The way to make co-workers more likable is to begin to see their actions through their perspective instead of through your judgments. Clarifying your parameters is a more professional way of dealing with relationships than walking the other way when you see your obnoxious co-worker coming down the hall towards you. If you want to be successful in this world, you’re going to have to learn to successfully deal with all kinds of people, and that means  building relationships based on the open, honest communication that leads to mutual understanding.


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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.