The business year has ended, but managers everywhere are turning their thoughts to one last Christmas present. The calculators are out and every eligible soul from Marketing to Manufacturing to Sales, IT, HR and the Executive Suite is trying to figure what their incentive check will be. For some, it's still the gift receiving season.
Year upon year the same bad script repeats itself for the annual management bonus process: objectives created at the last minute, embellished accomplishments dutifully recorded, problems and shortcomings diminished or forgotten and assessment forms looked at with disdain.
More than the mechanics are at fault
The process is flawed, yet the foxes remain in charge of the chicken coop – and they offer little hope for reform. Because for those in charge the process works, and self-interest pays its own rewards.
True pay for performance can be an elusive concept best remembered from Compensation 101 textbooks, suitable only for life as it should be, not as it is. Sad to say, but senior management is often the worst offender. I’ve seen senior executives adjust financial results to ensure that their own incentive awards aren't reduced. Senior staff deserves competitive incentives, don’t they? How can you not provide them with what they need?
Entitlement trumps performance.
While studies suggest that the I-deserve-it mentality has been reduced by the weak economy I believe that it’s alive and well wherever rewards are viewed as payment due for time served, not for effort and results.
It can be an uphill climb trying to persuade leadership that it's primarily good performance that should provide rewards; that tenure isn’t a compensable factor, that incentive payments should be deserved, not simply an automatic gift of delayed compensation. Lower level employees are expected to earn their rewards; shouldn’t the same case be made for management?
Have you ever told an executive that their annual incentive might be reduced because corporate or individual performance didn't meet expectations? They'd look aghast at the possibility. I’ve heard from many an executive who became upset when reminded of the review process and that the Board of Directors had to approve awards. The common attitude was, times up! – where’s the money?
Will the situation be any different for the upcoming incentive cycle? Bucking the trend of human nature is far from a sure bet.
To change those dynamics, as well as the effectiveness of your incentive plans you need to take action. With a new cycle beginning it’s not too late to have an impact, to instill a management pay-for-performance philosophy in your organization - even if it's only one step at a time.
- Performance appraisal shouldn’t be an activity list ("I was very busy"), but a focused statement of achievement against quantifiable objectives.
- Let the assessment tell you the rating, not the other way around ("how do I fill out this form to give a 4 rating"?).
- Ensure that the assessment form language corresponds to the performance rating.
- Completed forms should be required before an incentive payment is made – negating a procrastination trick ("Just process the check. I'll get the form to you . . . soon").
- Have objectives established early in the year, not in an after-the-fact rush at the end.
You'll need more than a steely look and a waving flashlight to stop a speeding freight train, so educate management about these ineffective and wasteful practices before the cycle restarts. Afterward is always too late; discipline as a learning tool is best used to prevent problems, not when hands are already reaching into the bag of checks.
Chuck Csizmar CCP
is founder and Principal of CMC Compensation Group, providing global
compensation consulting services to a wide variety of industries and
non-profit organizations. He is also associated with several HR
Consulting firms as a contributing consultant. Chuck is a broad based
subject matter expert with a specialty in international and expatriate
compensation. He lives in Central Florida (near The Mouse) and enjoys
growing fruit and managing (?) a brood of cats.
Creative Commons image courtesy of stevendepolo