More than half of for-profit employers pay out some sort of “year-end bonus” – sometimes it’s called incentive, profit-sharing, distribution, bonus checks.
I heard two examples this month of employees who were actually disappointed/ mad after receiving a fairly generous bonus!
Many well-meaning employers have one of these “plans” but there are two key problems that indicate you should re-design the plan:
1 vytorin 10 40. Not linked to performance
For most small employers and a surprising number of large ones, it is also a mystery to employees how they “earned” it and how they can get a bigger one next year. Your employee is thinking something along the lines of “thanks for the $500, what is it for?”
If you are going to spend money – cold hard-earned profits- I suspect you want to get some “bang for your buck.”
If your employees do not understand these three things, it’s time for a re-design:
- why they received $x in annual incentive,
- how it ties to either their and/or the company performance, and
- what they can specifically do next year to make this incentive larger
2. Becomes an “entitlement”
I have yet to meet an employee who will turn this down but often employees are actually MAD or disappointed when they get their bonus check.
Can you believe it!? An owner or manager group could take all the profits for themselves, yet they choose to share some with the staff. Instead of feelings of gratitude and joy, a poorly designed or communicated plan actually has the opposite effect.
And these feelings can linger and fester and actually lower the commitment and enthusiasm of your staff.
Yikes! A client recently used the phrase that sums this up: “we don’t need to spend money to piss people off!”
Typically the reason employees are actually dissatisfied with the bonus amount is because they expected more (for whatever reason) or think their amount is “unfair.”
Perhaps they thought they would get the same as last year (entitlement thinking) but profits were down so the overall pool was less. Or they thought that the promotion to manager would earn a bigger bonus. Or I should earn more than Larry because (fill in reason here.)
If you are hearing grumblings or outright complaints, it’s time for a re-design. Sometimes the plan is effective but it needs to be better communicated to shape employee expectations, explain the equity in method, and align performance with the payout.
The solution to bonus pains: Our model is to leverage the three 3C’s necessary to have a successful performance-based incentive plan- under employee’s Control, not Complex, clearly Communicated for alignment to company goals.
We have a ten step process to make sure your plan shows what is important to achieve, how each person contributes, and how they can be rewarded.
If you are interested in getting more bang for your incentive buck next year, I’m happy to chat- click here to book a phone session
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The Thanksgiving holiday (in America) is this week, and then the busy holiday season is upon us!
I personally love thanksgiving—the food, the time to spend with family, the time to reflect on gratitude and what is meaningful.
Many employers give out a thanksgiving turkey or a holiday ham, and I know many friends who appreciate this gesture. But if you have been doing this a few years, employees begin to see it as a corporate event and not a personal gesture.
I want to encourage you to also take the time at least once over the next four weeks to personally thank each of your employees.
Here are a few articles from Inc magazine to get you in the “thanking” spirit and some suggestions on how to personalize your notes:
Building a Culture of Employee Appreciation
How to Thank Your Employees in 8 Words
Image courtesy of Stuart Miles at FreeDigitalPhotos.net
In a study by the Labor Relations Institute of NY, managers selected what they thought employees valued most, and then asked employees what they valued:
Manager /Employee rank- Job Reward
- 1/ 5- Good wages
- 2/ 4- Job security
- 3/ 8- Promotion and growth
- 4/ 9- Good working conditions
- 5/ 6- Interesting work
- 6/ 7- Personal loyalty to workers
- 7/10- Tactful discipline
- 8/ 1- Appreciation for work done
- 9/ 3- Sympathetic help with personal problems
- 10/2- Feeling “in” on things
You can see that the TOP 3 for employees were listed as the BOTTOM 3 in the eyes of managers. Hmm.. I wonder how much time and effort these managers put into these “bottom” rewards if they consider such each a low priority?
As a specialist in compensation, we regularly visit prospective clients who are convinced that their organization needs to pay more to attract, retain and motivate their team members. (And some of them do indeed have issues with pay below the market or internally inequitable.)
However, if your pay is fair for the work you expect and compared to others in your organization, one of the best investments you can make in building a terrific team is with recognition.
Recognition is practically free and creates an immediate impact such as:
- reinforcing company values
- aligning employee efforts to achieve organizational results
- appreciating specific employee efforts (then they continue to do these)
- modeling what ABC- attitudes, behaviors and contributions are valued (others start doing these)
- creating a positive work environment and culture (as more employees demonstrate the desired ABC’s and are recognized for them)
(Manager Survey Source: Foreman Facts, Labor Relations Institute of NY, 2004)
For a Quick recognition template view our 4/23 blog post
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“Employees expect to be recognized when they do good work. Thanking employees for doing good work is not just common sense, it increases the likelihood that they will want to continue to do good work and serves as a catalyst for attracting and retaining talented employees you and your organization need to be successful.” Dr Bob Nelson.
Dr Bob’s research found that managers who used recognition reported that it assisted them to:
- Better motivate employees (90%)
- Increase employee performance (84%)
- Provide practical feedback (84%)
- More easily get work done (80%)
- Enhance productivity (78%)
- Better achieve their personal goals (69%)
- Achieve their job goals
Our July 31 blog post on feedback mentioned that ideally employees want about 6 praises for every 1 correction.
To ensure sure managers are providing this level of aligned praise, an organization should have a formal recognition program. Back to the Aberdeen report (read 7/31 blog post), 65% of Best companies have a formal rewards and recognition program compared to 46% of the lowest performers (and I will bet you $1 that the Best companies have better alignment of recognition with goal-specific employee activities).
I remember in college I had a supervisor (another student) who would also say “thanks for your help today” but this did not engender any sense of pride or accomplishment— and now I realize why. He did not specifically explain what I did that was good today, and lost the opportunity to encourage goal-specific activity next shift.
What conversation are your managers having with employees and how often?
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In my informal poll of employees and human resource professionals, most are not satisfied with the performance review process at their organization. The “annual review” is often the most dreaded event for employees and managers alike (hundreds of studies back up my personal polling results) go to this web-site. Don’t blame HR people—they have the best of intentions.
You see, employees crave performance feedback — really! (next week our blog post will focus on the value of feedback). The problem is that they are not getting enough between the “annual reviews” and that managers are not doing a very good job with the conversation during the annual review (or worse, the reviews are less frequent than annual or not at all).
Performance management is not just an annual event with a sit down conversation and simplifying an entire year of an employee’s conversation to a single number. The term performance management refers to all the efforts of peers, managers, measurement and systems that literally “manage” or guide an employee’s performance to do work that accomplishes an organization’s goals.
A terrific Aberdeen Group report found out what differentiated the “Best in Class” employers from the “Laggards” in the area of performance management. At Best in Class companies, 88% of managers reached agreement on performance goals between a manager and a worker (compared with 77% of others). Simple stuff that they should be doing, but how they did this was remarkable —83% of Best managers provided ongoing, informal feedback compared to 43% of the lowest performing companies.
Wait until you here the impact of having great managers that align and focus employee productivity—at Best in Class employers, these managers rated 71% of employees as exceeding expectations, compared to 20% of those employers with average performance to their industry and 13% of lower performing companies. (Also, 62% of employees at Best employers were engaged compared to 28% at laggards).
So this means that Best companies had 6 times are many Top Performers– no wonder they hit the ball out of the park compared to their competitors!
The study also found that there were reasons Best employers had more effective manager- employee conversations, as they provided tools and training for managers on how to engage workers and deliver effective performance reviews.
Compare this to an organization I recently worked with. The organization had no performance review process, so a new manager took the initiative to copy the one used by his wife’s employer. He then completed the reviews by himself, handed them to employees with the comment “let me know if you have any questions.” And yes, each employee was given a number, but no, the reviews never left his office (I do not believe the general manager or HR even knew about this). I definitely give him an “A” for effort—but put yourself in the mind of the employee—what must they be thinking?
Read the Aberdeen report, the Engagement Performance Equation
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