Most Bonus Plans Violate the “4 C’s of Variable Pay Plans”

Most Bonus Plans Violate the “4 C’s of Variable Pay Plans”

Currently I have four projects re-designing “bonus” or profit sharing plans for a wide range of clients (from 30 to 3000 employees, and from a local company to two mid-sized regional to a global one).

They all are faced with the same challenges:

  • Bonus calculations are discretionary (picked by the manager), with limited guidance on how to calculate an amount
  • Employees are likely not incentivized for the work that achieve business goals
  • Managers cannot clearly explain to employees what they need to do to earn the same or more next year
  • Employees don’t like or trust the plans (they do not believe bonuses are internally fair, or that their performance makes a difference in the final amount, or that their bonus is market competitive for their position)

To transition your bonus (profit sharing, incentive) program from a perk for employees to one that motivates and rewards performance and business results, it needs to follow the “4 C’s model.”

4’s Model of Variable Pay Plans

  1. Control- key individual performance measures in the plan align with business results and are under the control of the recipient
  2. Clarity – recipients understand the behaviors, activities and results they need to achieve what reward
  3. (not) Complex— maximum 4 measures (per job role/ level)
  4. Communication- recipients receive regular updates on the key performance measures to monitor if their work is achieving the target (even if payout is annual, monthly updates are ideal)

(4’C is the revised model from Dr. Jerry Newman’s 3’C Model, University at Buffalo)

Design steps to effective variable pay programs with the maximum business ROI

1. Basically, you need to go back to the drawing board to identify what matters most:

  • Outline key business metrics that add the most value to your firm and show achievement toward 5-year goals (strategy)
  • Cascade goals and down to department and job level key performance indicators (KPI)
  • Create a tracking and reporting system to communicate a monthly dashboard of KPI results (individual, department, company)

2. Finish with Incentive Plan Design:

  • When you have completed these first three elements, then link your incentive pool and payout calculation to reward those KPI
  • Keep it simple Sam, and communicate clear results often

The real “bang for your buck” will be that everyone be focusing their work on the most important things and finally understand how they can contribute to achieving organizational goals.

Then the incentive pool will be worth every penny.

(Sounds like a daunting task? With expert guidance to facilitate your management team through the 10 key decision steps, you can design a plan in about 3 months.)

Do you have a Scrooge leading your team?

Do you have a Scrooge leading your team?

Does “Scrooge” the manager still exist?

I love this holiday themed article by research group Zenger & Folkman. They research the key differences between high and low performing managers, and recently searched their database of 45,000 managers to identify the Scrooges.

They defined the Scrooge as a leader who is very task focused (drives for results) but has low consideration, and found that less than 1% of managers fit this profile (good news, unless you work there!). You know the type, like Danny Devito in the movie “Other People’s Money” running around yelling “back to work” to his frantic staff loitering outside their cubicles.

Despite the unpleasantness associated with this management style, is there any impact of driving for results while showing limited concern for employees’ needs and perceptions?

Actually, yes—how about the fact that new Scrooges have one-third fewer engaged employees than high impact managers!

The article published in Forbes doesn’t advocate for the opposite set of leadership behaviors (high consideration but low results orientation), as these managers are likeable but may not have high performing teams due to low accountability. This style often frustrates employees because poor performance is tolerated. In the Zenger research, employees with these types of “good guy” managers were only 3% more engaged than those that worked for the Scrooges (49% vs 46% engaged).

Decades of leadership studies have shown that the optimal leadership style focuses on both the task and the people – this achieves accountability and results through positive coaching. In the Zenger dataset, these manager’s style had a huge impact on increased employee engagement- 76% engaged employees (vs 46% for the low consideration manager who drives for results.)

To learn more about how to achieve this balance in your performance discussions, view our video “performance discussions” in the resource section of our free membership .

Link to the article:

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20 Competencies of a Great Coach

20 Competencies of a Great Coach

Would you want to work with someone who has passion, focus, integrity, and positivity?
Or how about someone with great planning and interpersonal skills?
Of course! (No wait, give me that team mate who is Debbie Downer, always late with her work and tactless…)

As a coach of People, you want to demonstrate both the business skills expected of peers and the leadership traits that build trust and engage a team.

Here is a fun and quick list compiled by a very creative guy, Barry Feldman.
He calls these the “monsters of influence” but I call them essential for a Coach.

Influence pulls your team together, rather than pushing them.

Homework: Want to do your own “self-assessment” for this year– how would you rate yourself on these? (And how would your team rate you?)

Image courtesy of David Castillo Dominici at


Wrong manager is chosen 82% of the time

Wrong manager is chosen 82% of the time

Want passionate engaged employees?

Then you need a passionate engaged manager with great leadership and coaching ability. One who focuses on productivity, accountability, and also cares about and builds trust with his or her team.

According to Gallup research, they say only 10% of people have the innate talent to do this, and that about another 20% can be effective if they are provided coaching and development to hone these elusive skills.

Gallup found 5 key behaviors that differentiated great managers from the poor ones (quoted verbatim):

  1. They motivate every single employee to take action and engage employees with a compelling mission and vision.
  2. They have the assertiveness to drive outcomes and the ability to overcome adversity and resistance.
  3. They create a culture of clear accountability.
  4. They build relationships that create trust, open dialogue, and full transparency you could check here.
  5. They make decisions based on productivity, not politics.

If the Fortune 500 can’t find good managers, how can your firm?
The good news is that people exist in your organization and in your neighborhood with these talents. The trick is to find them, develop them and give them a good team to work with.

If you have one or more managers, here are your action steps to find out if you have the right person in the right role:

  • Evaluate your current team for job fit (those in manager roles and those you see a high potential for that role in the future)- using a combination of personality assessment, performance analysis, and co-worker feedback
  • Coach and train you managers to build relationships (focus on the people) while emphasizing productivity and accountability (focus on the task)
  • Move those that are not succeeding in the role to another position

If you do not develop great managers, you are guaranteed to disengage everyone and are likely lose your top performers. They will leave to find a better manager somewhere else.

Read full Harvard Business Review blog article

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Training won’t solve an issue with Job Fit

Training won’t solve an issue with Job Fit

The following is a version of a conversation I have regularly with clients:

Client: “We really need some help with our sales process. Some of our bids require hours of preparation and document gathering. Our estimator needed extra help as he uses all his time to get vendor estimates and compute the final price. So he had Mary take over the non-pricing part of the bid.”

Diana: “So how did that work?”

Client: “Well, Mary started well, but the day before the bid she seems frazzled and needed the estimator to help her finish the packet.”

Diana: “So did you win the work?”

Client: “No, the bid was disqualified because it was missing two important documents.”

Diana: “Was there a list of all requirements in the bid package?”

Client: “Yup- right in the first two pages, there was a checklist of every required items.”

Diana: “Okay, we have two areas to concentrate.

First, you might want to talk about process improvement—what could be done better for the next bid. (For example, one person is responsible to double-check everything is there 2 days before the bid is due.)

I would suggest you get those involved in the bid process in a room and outline and clarify the ideal process and timeline, and then assign responsibility.”

The second area- Do you see a trend in Mary’s performance in planning of projects and detail orientation? Is she normally prepared with every item needed, well in advance of a deadline? Does she “future pace” what is coming next, reaching out to others to get what she needs to do her part of the project?

Or do you see the frantic last minute dash to pull something together at the last minute, and then something is usually forgotten?”

This is a function of job fit, some people are comfortable working in the moment, and do not typically focus on the future requirements. Some people have the opposite work habits- they setup checklists, verify that the list is complete and double check everything.

Planning and organizing is a competency—a soft skill that is based on our consistent personality traits, and can be somewhat refined and developed. (And you  can assess for this in the hiring process with a basic personality assessment).

If you step back and evaluate the trend of someone’s work habits, you will likely see a clear pattern of planning and organizing behaviors and results.

If Mary has not demonstrated a strong competency in planning and organizing, the solution is to give those tasks with someone else who has a stronger competency in this area (higher job fit). And then find short term and less detailed and crucial tasks that are a better job fit for Mary (increase her job fit).

Training and systems are most effective if someone already has the competency/ job fit in that area.

Want to learn more?

Find out how about how to identify the three main reasons someone isn’t keeping up (gap in ability, motivation or values) in our webinar “Evaluating Your Current Team for Job Fit.”

See our current webinar schedule and register here: People Plan Webinars

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6 Practices of Leadership

6 Practices of Leadership

Hundreds of studies have demonstrated that the most critical factor that impacts employee productivity, performance, retention and engagement is the relationship between an employee and his or her direct manager. As the book title clearly states “people leave managers, not jobs”

What can you do to transform your interaction and dialogue away from being a “manager” to being a coach and leader?

Brendon Burchard created an enthusiastic 11 minute video to outline 6 steps. Here are excerpts from this video below.

After watching the inspiring video- here are 6 things you do to implement this compelling model:

  1. Envision– Clearly (decide) define your vision for the organization, and outline your core values (I will give you bonus points if you involve your team in this process )
  2. Enlist– Share this vision in the most visual and engaging way and then ask “will you join me”
  3. Embody– Create a list of behaviors that embody your core values and then demonstrate them and recognize them <quick recognition template> and ask for feedback when you are not walking the talk
  4. Empower– Consider the language of your feedback, and modify to do more coaching less managing (nagging,  bossing) and have more frequent and open dialogues
  5. Evaluate– Employees want frequent, honest, appreciative feedback — formalize your management rhythm- with weekly conversations, monthly touch points, quarterly action plan updates
  6. Encourage– build in storytelling, recognition, celebration into your team updates agendas and process (think about little league)

Practice One: Envision The reason we say envision versus just have a vision is it’s a practice of envisioning – “what should tomorrow look like for my team?”

Practice Two: Enlist A great leader is always enlisting other people to believe in the dream, to shape the dream, to stay dedicated to the dream.

Practice Three: Embody as leaders we have to stand for and demonstrate and show and portray what we are really believing in

Practice Four: Empower Training other people and equipping them with everything they need to succeed has to be a vital practice of every great leader.

Practice Five: Evaluate Ethics and Progress That evaluation also brings up the incredible challenge that we face as leaders, which is to give honest, direct, immediate constructive feedback to those who are trying to influence and lead.

Practice Six: Encourage To encourage, to be the champion. To be the cheerleader. To be the person always motivating, inspiring, uplifting people.

Watch this video

Read the transcipt 

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