Last week, based on a number of conversations I had with Reggie, we started a heated debate about incentives and bonus compensation. Reggie’s experience had backfired on him.
“So, tell me Reggie, what exactly were you trying to accomplish with the bonus system? Because that is where we have start our discussion. What was the purpose?” I asked.
“The purpose, well, you know. I want my managers to stay focused, to have the company’s best interest at heart, to take that one more phone call before going home,” Reggie replied.
“And how did you communicate this to each of your managers?”
“Well, once a year, we sit down and look at their job. We break it down into Key Result Areas, then create a goal in each area, for the year. We attach dollars to each of the goals, to be paid quarterly. We are doing it just the way our consultant told us to do it.”
“And what are the results?”
“It’s all over the board. Two managers made most of their KRAs, but I don’t think they did anything special, it just happened. Three other managers did some suspect things to manipulate the numbers into the last quarter, so they got their bonus, but, they didn’t really achieve the goal, it just looked like it. And two other managers, well, they missed their targets, in fact, they quit trying about halfway through the quarter.” Reggie stopped. He didn’t like his own expert opinion on this.
“So, by your assessment, the bonus program achieved results in two cases, but you figure those results would have occurred with or without a bonus program. And in five other cases, the bonus program created manipulation or became a disincentive to performance,” I restated.
“Yes, that’s it. So, you tell me. What could we do differently to get the behaviors we want that drive the results that we want?”
I think the last few posts look at the wrong way to solve a very different problem.
The problem is to ‘drive behavior that gets results’.
And bonuses are used by firms as a ‘retention strategy’. Also they are discretionary and may not be paid if the firm is doing badly. So there is no obligation on the companies part and it still shows in your salary package.
“It’s all about the money…” Well is it really all about the money that drives people to perform better? Or is it just the easy way when you’ve got the budget. So what do we do when business is slowing down and there isn’t anymore budget? From where I stand that was the discussion for the last days. After a while people seems to interpret the bonusses as acquisition they count on, then is losing his value. Even sometimes results in manipulating the system because they don’t want to lose the extra money as Reggie experienced…
Whatever happened with getting a pat on the back?
What ever happened to the days when people agreed to do job and agreed to the pay for it without expecting additional pay for the work they have already agreed to do?