Tag Archives: incentives

Nobody is Happy

“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?”

Does Bonus Drive Performance?

“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?”