Perceived Value

2 09 2009

As leaders and managers we are trained to think of employees in terms of financial value.  We give financial rewards based ideally on merit and performance.  Unfortunately, we don’t use often enough other types of rewards for motivation and morale.

I have two young children who do not yet demonstrate much grasp of financial matters.  We offered them an allowance in an attempt to motivate routine and good behavior. While we understand the value, neither kid  asked for their allowance in the last year since it was initiated.  Clearly, it is not a motivational tool for our children right now.

Both kids, however, love hockey. My youngest often lets me know she does not have as many hockey cards as her “brudder” and her brother often defaults to creating quiet games with those same cards.  It seems only natural to use the cards as a motivational device.  We will have to see how it plays out, but a couple of days in I can already see a marked difference.  What are the financial tradeoffs – the hockey card budget is about 50% of what I would spend on allowance.

  • When was the last time you created a “pat on the back” program?
  • Could you do something different to motivate project completion?
  • When was the last time you walked around the organization with $100 bills and randomly rewarded people doing the right thing?

Rewards – The “R” in Continuous Improvement

24 03 2009

In continuing to explore a framework for driving sustainable continuous improvement in operational performance management, I’m taking this opportunity to outline the most critical, and often most difficult element of the Expectations-Capabilities-Rewards “ECR” model discussed in a previous entry.

There has been no shortage of press coverage recently about executive compensation. Even before the AIG bonus debacle of late, terms such as “performance pay’ and ‘retention bonuses’ have become a regular part of the business press vernacular. While we can all debate the ethical, moral and logical merits of these compensation practices, when an organization is implementing a performance management system to drive sustainable continuous improvement, the total reward system, not just compensation, is the most critical lever of change.

However, unlike these currently accepted pay practices, particularly in the financial services industry, reward elements within an effective performance management system don’t just translate to paying people more. The crux of an effective reward system is the alignment of rewards, recognition and compensation to the strategic goals of the organization – paying employees for the desired behaviors.

As example of a misalignment of rewards with corporate strategy; a personal experience. In a past role, I joined a $300mm public software company to launch a value-added services business unit. The CEO’s strategy was to transform the company from a hardware & software seller to a services-led solution provider; eventually generating +60% of revenue from services. The CEO was making significant investment throughout the organization in this transformation. However, there was institutional resistance to changing the sales compensation plan in order to drive sales people to focus more on selling these services. While corporate leadership was investing in service capacity, training sales people how to sell services and promoting this new value proposition in the press and to the investment community, sales people had no quota for selling services, received no quota relief and had no bonus kickers for including services in their software deals. The result? The strategy failed. Officially, the executive committee decided to refocus on software licenses, acquiring two other software firms two years later. But it was clear that the refusal to change the incentive comp plan contributed to this failure.

While traditionally the most difficult element to evolve, in order for any change to sustain within an organization, the rewards and recognition system must align with the expectations and strategy in order to drive the desired behavior that results in improvement in the new KPIs.