Category Archives: Leadership

Where Do You Spend Your Time

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From the Ask Tom mailbag:

Question:

What is the incentive to the person who performs at a higher level than the status quo, if they are rewarded the same?

Response:

While this sounds like a simple question, it is actually quite complicated. While I am not a fan of performance bonuses, I am a fan of differential pay bands for those who are more effective than others. Simply put, people should not be rewarded the same.

There should be different consequences. But the most powerful consequence may not be compensation.

A study was conducted with a group of factory workers. One group produced a high level of product each day (avg 94), the other group produced a lower level (avg 76). The manager was instructed to change two things.

First, each day, post the personal productivity of individual team members. Second, any team member who improved one day to the next, received a complimentary remark from the manager. No pizza, no bonus, no extra time off, just a complimentary remark.

At the conclusion of the study, the low performing group had improved from (avg 76) to (avg 84). Everyone was quite pleased.

The high performing group improved from (avg 94) to (avg 146).

Most managers end up spending time with their poorest performers. Where is the real payoff? -TF

Bringing Out the Best in People

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For the past two weeks, we have been talking about bonus and incentive systems, how they work, how they don’t work, issues of accountability. I have had more questions, emails and posted comments than any other time since we started this blog.

But we’re done. Change the subject. Because all these histrionics about bonus and incentive systems all scream at the following question. When all is said and all is done,

How do we bring out the best in people?

Next week, we will re-focus the discussion on that central question. Meanwhile, how do you bring out the best in your people? -TF

We still have three seats left in our Leadership program that begins next Wednesday in Fort Lauderdale. If you are thinking about putting someone into that program, please reply to this email or visit www.workingleadership.com. -TF

As Things Grow More Complicated

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“And where do you want accountability, solely on your shoulders, as the manager, or do you want the entire group accountable for their own performance?” I repeated.

“I want my whole team accountable,” Reggie replied.

“You see, Reggie, in the beginning, as a manager of a small team, you can take the brunt of the responsibility, because the responsibility is small. As time goes by, if you want to step up to larger responsibility, you will find that strategy will fail you. You, as the manager, can no longer solve all the problems, catch every package that falls off a forklift, fix every little discrepancy that comes roaring at you. If you try to do it all, by yourself, you will fail.

“So, you have managers who know they have to get their teams involved, to get their teams to hold themselves accountable. But they don’t know how. So, some consultant recommends a bonus program to get buy in. And you have seen, first hand, what that does to accountability.”

Reggie took a deep breath. “So, it was okay when things were small and times were good. But now that we are growing, more and more people are trying to game the bonus system.”

“And, lord help you, when times go bad, and they will. A bonus system during bad times is a sure-fire morale killer.”

“I think, the biggest lesson, for me,” Reggie replied, “is that, as things grow bigger and more complicated, I have to learn how to hold my people accountable to the performance standards that we set. And a bonus system doesn’t substitute for that skill.”

Where Do You Want Accountability?

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“Of course, no one is happy,” Reggie quickly responded. “The performance standard is not accomplished. I don’t care, as the manager, whether or not I pay the bonus. What I care about is the performance standard.”

“But, implicit in your agreement to pay a bonus for achieving a specific standard, was not paying the bonus if the standard was not achieved, so you cannot be angry, you cannot be upset and you certainly cannot hold them accountable for the underperformance. By agreeing to the bonus, you have told your team, it is okay for you to do less than your best. Accountability is out the window.”

Reggie was not happy. He did not like to hear this.

“Now, let’s go back to the conversation. You remember the conversation where you got your team talking about the performance standards instead of you?”

Reggie remembered. “This is where, instead of me telling them, I ask them questions, begin a discussion and together, we set the performance standard?”

“Yes, and what happens to accountability in this circumstance? Remember, there is no bonus, only you and your team. Where does accountability land in this conversation?”

Reggie was thinking through the conversation. Finally, he concluded, “If the group sets the performance standard, then accountability rests with the group.”

“And where do you want accountability, solely on your shoulders as the manager, or do you want the entire group accountable for their own performance?” -TF

Who is Accountable?

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Quick reminder. We still have space available in two of our Leadership programs. The program is six weeks (six sessions) in length, one program to be held in Fort Lauderdale FL (kicks off Wednesday, September 12), the other in Orlando FL (kicks off Monday, September 24). For more information, visit www.workingleadership.com.

Reggie and I kicked around his bonus system last week. Moving away from bonus as motivation requires a different mindthink on the part of the manager. Last Friday, we talked about the first shift, moving performance talk from the manager to the team. We talked about how the manager creates that conversation.

“Reggie, when you are barking all the orders, and telling people, if they will just perform to this standard or that standard, they will get an extra bump in their paycheck, where does that place accountability?”

Reggie looked at me for a minute, shook his head, “I’m not sure what you mean, where does that place accountability?”

“Reggie, the reason this is a difficult concept, is that most managers rarely talk about accountability. Back to the question. Where does a bonus system place accountability for performance?”

“I still don’t know what you mean?”

“The manager says, if you perform to this standard, you get an extra $100 in your paycheck this week. What happens to accountability for performance to the standard?”

Reggie was working through this in his head. “Well, the manager has done his job. He defined the performance standard and calculated the bonus, so it’s now on the team member?”

“Not quite,” I said. “The team member now has the choice to perform, or not perform and understands the consequences. If the team member underperforms, $100 of their promised pay will be withheld.

“So, the team member underperforms and does not receive the bonus. They’re okay with it, because, in the end, they didn’t have to work that hard after all. And the manager must be okay with it, because he doesn’t have to pay the $100.

“So the performance standard is not achieved. Who is accountable for the underperformance? Is everybody happy?” -TF

Accepted and Valued

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Great comments yesterday from Dean and Prices on Reggie’s Challenge.
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“So, Reggie, here is my challenge to you. In what way can you get your managers to talk about those behaviors instead of you?”

“But I’m the manager,” Reggie protested. “I thought I was the one to set the direction. I thought I was the one to give the marching orders. I thought it was my responsibility to tell them what to do. It’s my responsibility to manage them.”

“Reggie, people don’t want to be managed. People want to be lead. It is your responsibility to set the direction, but from there, your role becomes leadership. How do you get people to think? How do you get people to consider different alternatives? How do you get people talking?”

Reggie was quick to respond, “That’s easy. You just ask them questions. But I have tried that before and most times, I don’t get any response.”

“And why don’t you get a response. What’s the problem? What’s going on the mind of your team member?”

“Well,” Reggie started, “sometimes they just don’t have anything to say, and sometimes they are afraid to say anything.”

“Where does that fear come from?” I continued.

Reggie stopped. “I guess they don’t want to be wrong.”

“How could you change that? How could you create an environment of trust, where no matter the contribution, it was accepted and valued?” -TF

The First Change

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“So, you tell me. What could we do differently to get the behaviors we want that drive the results that we want?” Reggie insisted.

“You already have the first two steps,” I began. “The first thing you did was define the purpose for the program. You said the purpose to keep your managers focused on the company’s goals and to engage in behaviors to create those results.” Reggie nodded his head in agreement.

“Your second step was to communicate those behaviors you identified to drive the results you wanted, right? You did that in your individual KRA meetings.” Reggie continued to nod his head.

“So, if you didn’t have the bonus program, in two cases you would have achieved the results you wanted anyway?” More nods.

“And if you didn’t have the bonus program, three of your managers would not have spent counterproductive time trying to game your gross margin system?

“And if you didn’t have the bonus program, two more of your managers would not have become discouraged halfway through the quarter?”

“Okay, I’m with you,” Reggie interrupted. “But, what can I do differently, to make sure I get the behaviors I want?”

“Every week, you sat down with each manager and reviewed the behaviors you wanted, right? And each week, each manager promised to try very hard to do what you talked about, yes?”

“Yes.”

“So, stop talking about it. You stop talking about those behaviors.” Reggie looked puzzled. I continued, “The wrong person is doing all the talking. You stop talking. Your managers need to be talking about this stuff, not you. The first thing that needs to change is who is doing the talking.

“So, Reggie, here is my challenge to you. In what way can you get your managers to talk about those behaviors instead of you?” -TF

All Crumbs Lead to the Top

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“But the worst part of my little bonus system,” Reggie confided, “was not that my managers were manipulating the numbers, but I think it really changed their mindset. I corrupted their thinking and digging out of that hole is going to take time. And some of them will not survive.

“And the winner, the successful candidate who gets the position as the new division VP is going to think he got the job by gaming the system. It doesn’t matter how I explain it, in his heart, his experience will tell him that he got the job by playing with the numbers.

“It is really true,” Reggie continued, “the behavior you reinforce, is the behavior you get. I created the incentive. I got the behavior.”

“If you are going to create a different environment, what has to change first?” I asked.

“All crumbs lead to the top,” Reggie said. “I have to change first.”

Counterproductive To What We Stand For

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“So, you’re the culprit,” I repeated. “What specifically did you do that was so counterproductive?”

“No, I remember, it wasn’t anything extreme, but I began to hand out bonuses for the department with the highest gross margin, another for the highest revenue in the quarter.

“It’s funny, now that I think about it, when I handed out those bonuses, the room was really quiet. There was no jubilation or high-fives, just a nod and a polite thank you.”

“Tell me about the down-side?” I asked.

“I found out later,” Reggie explained, “that all of the departments were gaming the gross margins. They would pump up the pricing in the last week of the quarter and then rebate it back to the customer in the next quarter. In the end, we still got our standard margin, but the department was manipulating the bonus system.

“And it’s not so much that they had to pay the piper in the next quarter, but look at all the wasted energy, counterproductive to what we stand for. And the last thing on our mind was doing a good job for the customer.”

Motivated to Make Things Right

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“So, you were surprised that you didn’t get fired?” I asked. Kim and I were talking about her near disaster with a forklift.

“I was certain I would get fired. It was a boneheaded move on my part. But my manager, well, it was almost like he used a counterbalance. He knew he had my undivided attention over the forklift. He also knew that I was motivated to make things right. And he got someone to run the safety program, (me!), where it benefited the most.” Kim replied.

“How did that bring value to your thinking and your work?”

“Well, he could have fired me, he could have yelled at me. He could have embarrassed me in front of the team. He could have called me out to his boss. He could have suspended me. But what he did was to make me think.

“He had me motivated to sit down and learn more about how serious this safety stuff really is. It was one of the most important lessons in Leadership that I have ever been a part of.”