Reward and Expectation within Companies

Reward and Expectation within Companies

As the curtain comes down on 2009, thoughts of bonuses and pay increases and/or promotions may be in the offing for a number of enterprises. Some of these incentives are designed with the expectation of even better performance from the high-flyers whilst others are geared more as incentives to stay on with their employers.

The subject of “pay-for-performance” is a hotly-debated issue; this article restricts the discussion to matching the “reward” to the “expectation” – what does the company expect of the individual.

We can illustrate this important point by looking at some familiar examples:

The University
College professors are expected to teach their students well, mentor them and impart excellent knowledge-sharing habits within the class, etc. This then is the “expectation.” What is the professor’s reward – a tenureship. Now, tenureship at Universities is dependent upon (primarily) the publications put out by the professor. In other words, the more he/she published in his/her field, the greater the chances of being vested earlier – the “publish or perish” attitude! Logically, professsors spend a significant part of their time on research and publications and not-as-much-time on the students. Some classes are handled by Teaching Assistants (TAs) or Research Assistants (RAs).

Here we have classic case of the reward (tenureship) that is not aligned with the expectation (imparting excellent instruction).

The reward should be aligned
with the expectation.

Stephen Kerr, of Goldman Sachs, elaborates on the misalignment by giving further examples:

World War II vs. the Vietnam War
The expectation of the generals was to “win the war.” Hence, all WWII GIs were told “kill as many enemies, win the battle and (eventually, win the war) and you go home” (the reward). Here the expectation (win the war) was linked directly to the reward (go home). Compare this with the Vietnam situation. The expectation was no different from the WWII situation – win the war. However, the reward (go home) was linked to “complete your one-year tour-of-duty.” This misalignment resulted in a number of unintended consequences – “search-and-destroy” missions became “search-and-avoid” missions, “fragging” and “passing-time” became more of a preoccupation for some of the troops.

Similarly, rewarding commanding officers on “body count” is not a recommended incentive. This mechanism does not differentiate if the “body count” included friendlies.

If we look at incentive plans that are tied directly to performance measures, we have to identify, very clearly, whether those incentives address the expectations directly. One warehouse (of a distributor) had all incentives based on a team approach. All members of the warehouse team – pickers, packers and shippers were rewarded on the number of errors in the pick-pack-ship process. A picking error not caught by the packer would penalize the whole group. On the surface, this approach satisfies the team concept – “we float or sink together.” On the other hand, it gave rise to resentment among some team members who were more vigilant but were let down but others who were less so. A fairer system would have been a weighting system (weighted more heavily towards individual) that would have acknowledged the individual contribution more with a smaller weighting (on a group basis) in the event of penalties. This has to be reinforced with corrective action on the recalcitrants so that learning and improvement can occur.

Employee satisfaction in the workplace is yet another example of a performance improvement area which is often linked to incentive plans. High employee satisfaction scores are tied to manager appraisals and, hence, reward mechanisms. If the employee survey is properly designed, you need to ensure that the scoring and reporting are not carried out by the same individual (or department). This ensures that due credit is given to the right individuals who genuinely foster better employee engagement.

Hence, the next time you are charged with designing incentive plans, make sure you are aligning the rewards to genuine process/people improvements (the expectation). It is only in this manner that real improvements can be realized – ones that reflect your company values while contributing to your strategic objectives.

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