“And what else?” I asked.
“This is a tough one,” she started. “Our bonus system. I think our bonus system is causing some of the problems.”
“How so?”
“Well, we wanted to make sure we didn’t get into lawsuits based on construction defects, so we pay a bonus to our engineering manager when we have zero claims. It sounds noble, but that sets up someone to over-work against our operations manager, who is just trying to get the job done.
“To make matters worse, we diligently work the project schedules to avoid delay claims. Delay claims can do more than suck the profit out of a job. So we pay a bonus to our operations manager when we have zero delay claims.
“So, now I have two people on the same team who are working against each other.”
“What else?”
Alicia began with a blank stare, then a hint of something in her mind. “I think,” she replied, “the worst part about our bonus system is that it creates mistrust.”
Simply put – reward the group or entire company based on profitability on the project, job, month, quarter, or year. It’s not about “the one job†or “the one person†it’s all about the overall big picture. Reward the job or individuals with some public recognition.
The dreaded bonus system has always caused problems within our organization. Rewarding a single function in any dynamic operation is a fatal mistake. For example, quality and accuracy are in direct conflict with speed and timely deliveries. All things deemed important must be carefully considered when approaching an incentive for performance plan.
Before jumping on the bandwagon of incentive pay, consider if there are any conflicts that may cause bigger problems than you already have. Remember that when you publically measure something and reward for it, other things may not get done since you have signaled their unimportance. This is a real life “Be Careful What You Wish For†situation. Don’t assume that just because incentive works for sales it will work for other aspects of your organization.
The hard truth is that it’s all about teamwork, communication, critical conversations, culture, training and identifying what you stand for and what your core competencies are. My belief is that compensating certain individuals, other than the accepted sales force, erodes trust, teamwork, and culture in most companies.
But why should the sales force reap the rewards of closing deals when the rest of the team is responsible for delivering those closings? Maybe the sales team should be rewarding the rest of their colleagues for deliveries. Wouldn’t the sales team suffer financially if items weren’t delivered or on time?
I’m going to go back to the original post now: Contsruction defects being my topic. This sounds like a quality control issue. Do you have a team for that? Perhaps you should relieve the managers of that task and let them focus on the rest of their tasks. Create a job or couple of jobs for quality control. Wouldn’t you then eliminate the conflict of interest?