Compensation Cafe

Is Viral Pay Contagious?

With a name like ‘viral pay,’ it’s bound to get attention.  But is it just a catchy name or is there more to it?

I was skeptical at first because having your bonus decided by your colleagues sounds a bit like ‘being judged by a jury of your peers,’ which as we all know is not always fun or fair.  But reading this article at Fast Company provided an opportunity to re-think my assumptions. 

Whatever your rewards policy du jour, human frailty threads through every aspect of management, team work and incentives.  If you leave rewards up to managers you run the risk of centralized human frailty in the form of favoritism, whereas if you open it up to the community you risk decentralized human frailty in the form of a popularity contest. 

Think about it: Who typically gets voted off the island, the least qualified person or the least likeable person?  I don’t want to generalize here but the last person standing tends to be a charismatic buffoon rather than a highly competent person with an offputting personality.

What it essentially comes down to is this: People vote for people they like to the extent that it doesn’t create a threat or disadvantage to themselves. 

Now let’s examine the possible impact of human frailty on viral pay.  On the positive side, allowing everyone to decide about rewards decreases the impact of manager bias and may increase the likelihood ‘silent heroes’ receiving recognition.  It also encourages teamwork and cooperation because personal rewards depend on garnering widespread good will. 

On the downside, while relationship building is very important, we don’t want it to take a back seat to actual work getting done.  There’s also a risk of employees trying to ‘game’ the system, for example by trading rewards.  Finally, people do have a perverse streak and may be reluctant to reward people they think are already too popular or successful. 

Getting back to the article, I liked IGN Entertainment’s approach to viral pay because it includes several checks and balances to rise above personal bias and encourage fair play:

• Rewards are anonymous, so there's no currying favor.
• Everyone has the same amount to allocate so it's harder to game.
• Some rewards are held back for manager discretion, so collective opinion is balanced by personal judgment.

Whether you buy into all this or not, viral pay is just one more step in the direction of a more collective approach to work and leadership.  As I recently wrote in Who Moved My Manager?, the modern workforce is 'global, virtual, fluid, contingent, self-managing, and project-oriented,' which impacts how people work together as well as how they are managed. 

In other words, whether it sticks or not, viral pay is part of a larger trend rather than an isolated fad.  For more information and great insights, I recommend listening to Ann Bares and Stephanie Thomas' recent podast on viral pay.

Interestingly, no one seems to be suggesting that employees vote on executive bonuses. . .

Picture courtesy of kool-stuffs.blogspot.com.

Laura Schroeder is a global talent specialist at Workday, headquartered in Pleasanton, CA.  She has nearly fifteen years of experience envisioning, designing, developing, implementing and evangelizing global Human Capital Management (HCM) solutions and holds a certificate in Strategic Human Resources Practices from Cornell University.  Her articles and interviews on HCM topics have been published in the US, Europe and Asia.  She lives in Munich, Germany and enjoys cooking, reading, writing, kick boxing (well, kicking things) and spending time with friends and family. If you want to read more from Laura, check out her talent management blog Working Girl or follow her on Twitter @WorkGal.

3 Reasons Valentine’s Day (and Poorly Designed Employee Rewards) Often Goes Badly

It’s Valentine’s Day – a “holiday” equally loved and reviled. Actually, once I tune out the industry advertisements, not many people spring to mind who look forward to and enjoy the day.

I think the same is true for many employee recognition and reward programs – for many of the same reasons.

3 Reasons Valentine’s Day (and Poorly Designed Employee Rewards) Often Goes Badly

1) It’s a Hallmark Holiday.

Some think a grand romantic gesture given one day a year can make up for 364 days of mediocre behavior. Relationships – whether romantic or employee/employer –require constant nurturing and investment. Employees need to know they and their efforts are valued more often than the day of the annual performance review or Employee Appreciation Day.

I have friends and colleagues who object to Valentine’s Day simply because they don’t appreciate the greeting card and chocolate industries telling them what they should do and when. I have friends and colleagues who feel the same way about Employee of the Month programs and similar. Such programs are as inauthentic as a day dedicated to “love.” Employee recognition should be a natural part of the daily workflow – something employees at every level “just do” when they see a colleague demonstrate superior performance reflective of your core organization values.

2) Appropriate gifts are prescribed.

I’m as much a fan of good chocolate as the next guy, but my friend two offices down would be insulted by such a “gift.” She’s a Type-1 diabetic and has had to be quite careful about what she eats for as long as she can remember. Another common Valentine’s Day gift – flowers – would send some recipients into a allergic sneezing fit. And yet chocolates and flowers are two of the most common gifts given on Valentine’s Day.

This is similar to a common problem of poorly designed employee rewards programs – rewards left to the choice of the HR program manager or the employee’s manager. I’ve heard many stories of well-intended rewards gone wrong:

• The gift card to a steakhouse restaurant given to a vegan employee
• The engraved espresso machine given to a Mormon (who eschew caffeine)
• The iPod given to a deaf guy.

A far better option is to stop listening to what the industry tells you are appropriate gifts or rewards and let your employees choose for themselves, from nearly limitless options.

3) It can create the opposite of the desired effect.

Over the years, have you ever comforted friends who were single on Valentine’s Day? True, many think the construct is ridiculous, but for many others the day highlights their single status in a way that can seem cruel.

The same is true of traditional employee recognition and reward programs that target the elite top 10% of high performers. At the annual awards banquet, it seems the same group of employees continually receives all the accolades. Yet it’s the vast majority of employees in the middle – those who get the work done day-in and day-out – who make is possible for your stars to shine. They, too, are deserving of recognition for their consistently high-quality work.

Are you a fan of Valentine’s Day? How about Employee Appreciation Day or the like? What would you prefer instead?

As Globoforce’s Head of Strategic Consulting, Derek Irvine is an internationally minded management professional with over 20 years of experience helping global companies set a higher ambition for global strategic employee recognition, leading workshops, strategy meetings and industry sessions around the world. His articles on fostering and managing a culture of appreciation through strategic recognition have been published in Businessweek, Workspan and HR Management. Derek splits his time between Dublin and Boston. Follow Derek on Twitter at @DerekIrvine.

You Made a Mistake? Great Work!

What happens to people in your organization who make mistakes?

Typically, organizations react in three ways:

1. Ignore the mistake and hope it goes away
2. Discipline the perpetrator and take corrective action
3. Reward the mistake-maker

What’s the best reaction? Obviously, ignoring the mistake is never the answer. Options two and three, however, are both perfectly rational, reasonable, and right.

I recently offered my life approach to mistakes as: If you mess up, ‘fess up. Then offer first a clean-up plan, and then ideas to make sure it never happens again.

In many situations, that is the correct and proper approach. But not always. Well, at least the last part isn’t always true. After all, would we have WD-40 (a true modern miracle) today if the people responsible for creating a new water displacement fluid gave up after formula 3 or 15 or 39? Or what about Post-It Notes? I can’t think of an office today that can function effectively without those little yellow squares. But the glue that makes Post-It Notes possible was a huge mistake. What if the inventor had simply swept his error under the rug and hoped nobody noticed?

Sometimes, mistakes move us forward. Smart businesses (and business leaders) know that.

A recent article in Inc. magazine made this observation:

“Everyone makes mistakes—every entrepreneur, every business leader, every employee. The mark of a great company isn’t that it avoids failures—that’s impossible—but that it has the wisdom to take full advantage of them.”

The article went on to point out “two prime ingredients of a brilliant mistake:”

1. Something goes wrong far beyond the range of prior expectation; and
2. New insights emerge whose benefits greatly exceed the mistake’s cost.

“The brilliant part lies especially in condition (2), but also in recognizing that (1) is necessary for (2) to occur. You want to increase the chance of (1) and (2) occurring together. When they do, you could have a brilliant mistake on your hands.”

I would add to this two more necessary ingredients:

1. A culture in which people are expected to be curious and to pay attention to mistakes – to the “what just happened” moments – and make out of them what they can. The invention of the microwave oven comes to mind. A Raytheon employee was working on radar systems when he noticed a chocolate bar in his pocket had melted. His curiosity led him to figure out the microwaves in the radar system had melted his candy without harming him, which eventually led to the appliance most home kitchens are never seen without.
   
   
2. A commitment to recognize and reward mistakes, not just successes. Most companies prefer to call this strategy “rewarding risk-taking,” not mistakes, but it amounts to the same thing. Think of the profound negative impact on innovation and new product development if employees in your R&D department were only recognized and praised for “achieving results” and not for “risk taking.”

How does your organization and management team typically respond to mistakes? I offer a challenge in today’s post – in 2012, make a commitment to recognizing and praising errors. Look for the “oops” moments and see what positive lessons (or even ground-breaking products) can be created from them. Congratulate those who mess up, but ‘fess up, and then learn from their errors in a constructive way.

As Globoforce’s Head of Strategic Consulting, Derek Irvine is an internationally minded management professional with over 20 years of experience helping global companies set a higher ambition for global strategic employee recognition, leading workshops, strategy meetings and industry sessions around the world. His articles on fostering and managing a culture of appreciation through strategic recognition have been published in Businessweek, Workspan and HR Management. Derek splits his time between Dublin and Boston. Follow Derek on Twitter at @DerekIrvine.

Retention v. Engagement: Stay or Play?

Imagine you're in a management meeting where the main topic is how to attract and retain the best people.  Someone expresses frustration with not being able to reward top performers with cash and the conversation segues into topics like engagement and non-monetary rewards. 

That’s a great conversation for managers to have but it’s important not to confuse retention policies with engagement policies.  Although there’s overlap between how you approach engagement and retention - after all, engagement is the best way to retain people as long as you don’t grossly underpay - the target audience is a bit different. 

Let’s start with engagement: Ideally you want to engage everyone in your company.  If you can’t engage everyone, focus on the people who have the most impact on customer experience and the highest performance variation, as I wrote about in a recent post Maximizing Your Rewards ROI.  That’s not the same as focusing on top performers, which is the more common approach.

Engagement creates that wonderful team dynamic that leads to outrageous customer experience and improved performance, with low turnover as an added bonus.  Typically, you engage people with something other than money, such as appreciation or increased responsibility, but money may also play a motivational role.

Consider a typical sales clerk at a jeans store.  A neutrally engaged clerk shows up for work, responds to inquiries with a baseline of helpfulness and rings people up.  An engaged clerk makes people feel welcome and proactively offers sincere - and truthful - advice on the most flattering jeans styles.  This is a perfect example of high impact to customer experience combined with high performance variation, which is exactly where you want to focus your engagement efforts.  It's also a good place to channel scarce rewards, since the clerk will be more passionate about moving jeans out of the store for a percentage of the sale.

In other words, your strategy toward the sales clerk should be focused on engagement, which will positively impact retention as well.

Now let’s look at airline pilots, who have a built-in incentive to perform well, independent of things like salary, appreciation and career opportunities.  You don’t want to lose your best pilots to a competitor, but you also don’t get much value out of trying to ‘engage’ your pilots.  A pilot’s job is to deliver people to wherever it says on the ticket.  To this end, they’ve had thousands of hours of training and flight time, so we don't expect wild variation in performance whether they feel engaged at work or not.  If they don't meet a baseline level of performance they won't be pilots any more, plain and simple.

In the case of pilots, your primary goal is to retain rather than engage.  It's not that you don't want engaged pilots but the business driver is subtly different.

Here's your checklist for retention policies:

• Performance is consistent
• Direct impact on customer experience is low
• A high degree of training and/or experience is required to do the job

For engagement policies, the opposite is true:

• Performance varies from person to person
• Direct impact on customer experience is high

In other words, an engaging culture confers all sorts of benefits but if you target workforce segments with tailored rewards think carefully about your audience and what your goal is - are you rewarding people to motivate them or to retain them?  It makes a difference.

In conclusion, here’s a little poem I wrote to explain the difference between retention and engagement:

Stay or Play?
Retention gets people to stay.
Engagement turns work into play.

(Don't worry, I won’t quit my day job.)

Picture courtesy of funny-potato.com.

Laura Schroeder is a global talent specialist at Workday, headquartered in Pleasanton, CA.  She has nearly fifteen years of experience envisioning, designing, developing, implementing and evangelizing global Human Capital Management (HCM) solutions and holds a certificate in Strategic Human Resources Practices from Cornell University.  Her articles and interviews on HCM topics have been published in the US, Europe and Asia.  She lives in Munich, Germany and enjoys cooking, reading, writing, kick boxing (well, kicking things) and spending time with friends and family. If you want to read more from Laura, check out her talent management blog Working Girl or follow her on Twitter @WorkGal.

Yet Another Reason to Rethink a Bonus Culture

Already this year I’ve written a few posts (here, here and here) on why bonuses as a primary means of recognition reward fail. Now I’ve read some research featured by Dan Pink, in which he recounts experiments done with two groups. While taking a simple survey, one group was given a visual “cue” of seashells. The other was given a visual cue of money. The result:

“Liu, Smeesters, and Vohs say that money cues can operate as threats and “produce contrarian reactions that are the opposite of the source’s intent.” Other research has shown that being reminded of money can make people more single-minded and more apt to work harder — but also less social, less cooperative, and less likely to help others.

“It’s a bit odd, they explain. ‘Money has bigger effects on people’s thoughts, feelings, and behavior than simply what it can do as an exchange medium or store of value . . . Mere reminders of it are enough to drastically change people’s preferences for work, play, and interpersonal relationships.’

“So the next time you try to raise the issue of moolah in an effort to persuade a prospect or an employee, think twice. Making it all about the coin can sometimes get you the opposite of what you want.”

Single minded and harder working are, indeed, good results – but is it worth the trade-off of employees becoming less likely to help others?

What should you do instead? Keep in mind the research showing that hearing a simple “thank you” made the recipient 100% more likely to help again in the future.

“Thank you” vs. bonus. More willing to help vs. more selfish.

The choice seems easy to me.  But if you need more convincing, check out this video of real-estate mobul Barbara Corcoran, founder of the Corcoran Group and personality on ABC's Shark Tank. Corcoran speaks to recognition motivating better than money by driving people to think differently and bulding people up again and again.

Pay particular attention to the 04:22 mark where Corcoran says:

"Recognition will buy you time. Not phony recognition - 'Oh, you’re amazing,' but real recognition - 'I want to tell you what a great job you did.' Private recognition, not public. Whatever you can do to give people recognition for their uniqueness and success, people will marry you forever."

So if you don't use money to motivate, what should you do instead? Forbes offers this list of 8 ways to motivate without money.

Do you rely on cash bonuses as your primary means of recognition in your organization? Are you willing to trade willingness to help for selfishness?

As Globoforce’s Head of Strategic Consulting, Derek Irvine is an internationally minded management professional with over 20 years of experience helping global companies set a higher ambition for global strategic employee recognition, leading workshops, strategy meetings and industry sessions around the world. His articles on fostering and managing a culture of appreciation through strategic recognition have been published in Businessweek, Workspan and HR Management. Derek splits his time between Dublin and Boston. Follow Derek on Twitter at @DerekIrvine.

Don’t Tell Me I’m Great If I’m Not!

I have both friends and clients who have been struck by an unfortunate dilemma. I have a couple of friends who have been told one thing for months, and perhaps years, only to find out that the truth they knew wasn’t the “real” truth. I have clients who need to realign pay for people who have been told they were top performers when, in fact, they are less than adequate. In both cases it seems more like senior managers were trying to be nice, rather than sneaky.

Why have confrontation when you can have everyone like you? It’s easier to be nice to everyone. Many managers have made this their approach to leading their staff. Rather than point out flaws, they point out only the positives. Rather than prepare their staff for bumpy water in the future, they keep things on the bright side right up to the moment the boat hits the dangerous rapids. The discussion of a potential demotion, cut in pay or job-ending decision never seems to make it onto the agenda.

Employees want to be led, and generally want the truth. I also think managers generally want to tell the truth, but seldom have the skills to do so delicately. While these managers do a disservice to employees by not laying out a realistic path, those of us in the compensation community do even worse by not providing them with the tools, words and examples that will allow them to discuss both the good and bad.

We can’t expect great employees who have been promoted to be great managers to be able to talk about pay issues with any amount of expertise. We also can’t expect that they will always do this task well, even if they have been trained. We need to make it clear what needs to be said to underperformers and check back to make sure it has been communicated.

This is not about avoiding lawsuits or angry ex-employees. This is about not being jerks in the eyes of those we need to keep working hard. Once the trust on performance has eroded in a single example, you risk the chance of other employees questioning their value to the company. Rebuilding trust is far more difficult than maintaining it. Like a swimming pool, it is far easier to keep it full than it is to fill it up.

So look at what you've asked managers to communicate. Then ask yourself if you have provided them the skillset to do so with a complete level of truth. It is not only our job to make sure that pay is properly designed and set, it is also our responsibility to ensure that the discussions around pay reflect the sometimes harsh reality of underperformance.

Dan Walter is the President and CEO of Performensation an independent compensation consultant focused on the needs of small and mid-sized public and private companies. Dan’s unique perspective and expertise includes equity compensation, executive compensation, performance-based pay and talent management issues. Dan is a co-author of “The Decision Makers Guide to Equity Compensation” and “Beyond Stock Options.” Dan is on the board of the National Center for Employee Ownership, a partner in the ShareComp virtual conferences and the founder of Equity Compensation Experts a free networking group. Dan is frequently requested as a dynamic and humorous speaker covering compensation and motivation topics. Connect with him on LinkedIn or follow him on Twitter @Performensation and @SayOnPay

Got Data?

I recently replied to a question on Focus.com about employee engagement and was intrigued by a response that criticized HR for their heavy handed control over salaries.

The example given for why this is a problem involved a highly skilled IT professional with four children who has reached the top of his salary grade at his current company.  There is apparently no possibility of increasing his salary although he has taken it upon himself to acquire marketable new skills and at least one other company has offered him more money.

No clue how this one’s gonna play out, huh?

I get it.  We all get it.  Salary ranges are there to promote fairness and reduce the administrative overhead created by exceptions.  These are good things.  But here’s this guy with hot technical skills about to walk because he has a family to support and earns less than the market is offering.  Not to mention that replacing him will be expensive in terms of recruiting, training and lost productivity - possibly more expensive than just paying him more in recognition of his market value.

It sounds like I recommend paying him more to keep him but I’m actually going somewhere else with this.  In fact, I’m a big fan of voluntary attrition because it feeds this Ponzi scheme we call ‘career development.’

My point is if the company is going to lose this person, lose him with intent.  In other words, if your company has a hard rule about salary ranges that’s fine as long as you have:

•    Analyzed which people are flight risks as a result.*
•    Calculated the cost of losing these people and having to replace them. 

*Warning signs include people who are already at the top of their grade, have dependents, possess critical skills, are solid or high performers, haven't had a salary increase or new opportunity in several years, have recently exercized stock options, are late submitting their self-evaluation and/or are frequently absent. There are other signs as well but these are the ones you can get at through your data.

Armed with this information you can evaluate whether it’s worth: 1) changing your policy; 2) creating a new salary grade for highly skilled people to ‘graduate’ into once they reach a certain level of expertise; or 3) doing nothing, but on purpose.

If you don’t possess this critical information about your workforce, an inflexible salary strategy is like a wall across an expressway that surprises people each time a car crashes into it.

OK, that analogy may have been too colorful.  My point is that rigid policy combined with lack of information does not a business strategy make.

At least, not a very good one.

Picture courtesy of Wikipedia.

Laura Schroeder is a global talent specialist at Workday, headquartered in Pleasanton, CA.  She has nearly fifteen years of experience envisioning, designing, developing, implementing and evangelizing global Human Capital Management (HCM) solutions and holds a certificate in Strategic Human Resources Practices from Cornell University.  Her articles and interviews on HCM topics have been published in the US, Europe and Asia.  She lives in Munich, Germany and enjoys cooking, reading, writing, kick boxing (well, kicking things) and spending time with friends and family. If you want to read more from Laura, check out her talent management blog Working Girl or follow her on Twitter @WorkGal.

Implementation: Action that Must Follow Ideas If You Actually Want Something to Happen

Each year we step back to adjust to an updated business strategy that addresses new challenges. We plan alignment of objectives, behaviors and performance with that strategy. And then we try for effective implementation of the strategy so we can achieve the planned-for results . . . results that fund financial success and compensation.

This is the virtuous cycle in which you invest your hard work and the company's money.

As we all know, HR plays a critical role as facilitator of alignment and educator of effective implementation. Many of you are in the midst of the objective setting process right now, where you are responsible for training and facilitating the cascade of objectives within your organization.

Objectives that employees should be developing to link with corporate performance. Otherwise, their work will have only a glancingly positive impact on financial and operational results -- or could misguidedly create obstacles that have negative impact on those results.

There is no doubt that your employees' ability to adapt to each new strategy impacts the success of your company. Look at this result from the World's Most Admired Company research conducted by the Hay Group in partnership with Fortune Magazine. It makes it clear that "Most Admired Companies" do a far better job of implementing their strategies (and achieve significantly higher Total Shareholder Returns).  

And their HR organizations do a better job of implementation, too. Implementation of new programs and existing programs like compensation that can truly play a role in the business strategy when employees see strong linkages and understand how they can impact success. 

Over my next few blog postings, I'm going to cover what effective implementation means, how it can help you and what you can think about doing differently. I thought it would be a great time of year for this discussion since you'll be turning new ideas into plans over the next few months.

Turning great intentions into business results is really where the rubber meets the road. Great ideas become actual business opportunities only when people understand clearly and then are willing and able to do the tough work of changing to a new focus and new practices.

I'll be talking about communications and I'll be talking about change management, too. After all, compensation is a form of change management. Every paycheck sends the message that we expect employees to assess a changing environment and profit from changing opportunities.

Margaret O'Hanlon is founder and principal of re:Think Consulting.  She has decades of experience teaming up with clients to ensure great Human Resource ideas deliver valuable business results.  Margaret brings deep expertise in total rewards communications and change management to the dialog at the Café. Before founding re:Think Consulting, she was a Principal in Total Rewards Communications and Change Management with Towers Perrin. Margaret is a member of the Board of Directors of the International Association of Business Communicators (IABC), Pacific Plains Region. She earned her M.S. and Ed.S. in Instructional Technology at Indiana University. Creative writing is one of her outside passions, along with Masters Swimming.

The Best Recognition I Ever Received

Today's post comes to us courtesy of guest contributor Jacque Vilet.

You know Derek Irvine writes some great articles at the Compensation Café regarding recognition.  And 99% of it has nothing to do with money!

I’ve been thinking about that a lot recently.  It’s true . . . at least for me.   The best recognition is not about money.   It’s about feeling appreciated.  It’s about feeling that you did something good, and it was noticed.   It makes you feel you are not just a cog in a wheel but a person. It makes you feel that you are valued for your expertise, good judgment, decisions and  recommendations. That you have the best interests of both the company and employees at heart.

I want to tell you about the best recognition I ever received in my career.   The company shall remain nameless but other than that it is a true story.

I went to work for a company that had operations in 20+ countries.  I was the International HR Manager.  There were no HR people outside the U.S.   My manager told me they weren’t sure how many employees they had at each location and that this was embarrassing.   He said the CEO was upset that HR could not even answer a simple question like “How many employees do we have outside the U.S?”

My manager also told me that he didn’t know if the company was legally compliant in each country, had no idea what, if any, policies each location had, what their compensation was or what benefits they had.   He told me “it’s yours --- go for it”.

I did audits in each location, participated in surveys, made sure each country was legally compliant, worked with business units to insure their employees in each location were paid competitively, and recommended supplemental benefits where needed.  Each time I needed approval for something I was given the go ahead.

Toward the end of the “cleaning up” phase, I decided the company needed to implement multinational pooling.  It was approved by my manager.   I next made my presentation to the SVP of Administration.   He asked me to come back to him and discuss it  three times.   At the end of the third session he finally looked at me and said ---- and I’ll never forget this:

“Jacque we hired you for your expertise.   None of us here in the company know anything about international HR.   I still don’t totally understand multinational pooling.  I rarely approve something that I don’t fully understand.   But if you think we should do it I approve it.   I trust you and believe you have researched this and know what is best for the company and our employees.”

Well . . . . . . for the next week I was walking on air.  I can’t tell you how much that comment meant to me.   The SVP could have given me a “dinner for two coupon”, a $100 check, a plaque, etc.   But the best thing he did was give me recognition that made me feel like a million dollars.

I can assure you that I worked even harder than ever from that moment on.   I was determined to never make the SVP regret his words.

I have not forgotten his comment, and I never will.

Jacque Vilet, President of Vilet International has over 20 years’ experience in International Human Resources with major multinationals such as Intel, National Semiconductor and Seagate Technology.    She has worked with both local nationals and expatriates and has been an expat twice during her career.    Jacque holds the CCP, GPHR and SWP (Human Capital Institute).  She is a member of WorldatWork,  Society of Human Resources Management and the Human Capital Institute.   She is co-chair of the Global HR professional emphasis group for the Dallas chapter of SHRM.  She is a regular contributor to HCI, HR.com and IHR Forum.

Image courtesy of imagegossips.com

Are Your Performance Reviews like an Annual Physical?

I don’t know anyone who looks forward to their annual physical. There is very little about the process that exudes positivity. Nearly all of us know that  we could have eaten better, exercised more or paid better attention to our health. Even those in the best of health dread the thought that this might be the year that something “serious” may be found. The potential “big-ticket” items overwhelm the progress that may have occurred at other points in the year. The process can also a bit too personal, requiring you to expose more in a single sitting than you care to discuss.

When we are young we tend to simply avoid these events altogether. We assume that we are fairly healthy. Any minor issues can be worked out before we age. We feel good most of the time and have fairly good reasons for those times we don’t. What can a doctor tell us that we don’t already know, or that we’d even care about?

Performance reviews for young employees can be the same. The immediacy of life and the general feeling, and reality, of rapid ascent create less importance for what others think on a once-a-year basis. You have a job, but you know it isn’t likely to be your career. You plan to deal with any problems that may pop-up on an as-needed basis. Nothing lasts forever.

As we get older we start paying more attention. There are mandatory tests based on who and what you are doing. The low-level risks that were built when you were young become high-level risks or actual issues as the problems build over time. The rapid ascent of an early job gives way to the plateaus, jumps and starts of a real career. Some of the bad habits of your youth have simply become part of who you are. You take your medication and keep on going.

Imagine if you had access to your health profile at your fingertips. Imagine if your recent decisions could be quickly analyzed for potential harm and a correction plan laid-out prior to real issues arising. What if you had a medical professional who could answer questions on the fly and point out the best choice to make before you made it?

Whether you were young or old, the process would be more useful. When you’re young, this type of review would fuel a much faster rise and would allow you to make more intelligent decisions about the foundation for your future career. When you are not so young, this type of process could help avoid career-ending or limiting decisions and ensure that you continue to evolve when paths might otherwise flatten.

In both scenarios, the annual review seems ineffective when compared to more frequent or even ad-hoc reviews. So, why do we expect our annual reviews to be effective in the workplace, when they do not work in our private lives?

We received grades and progress reports on regular basis as children. That seemed to work. Science confirms that recognizing someone for good or poor results when the results are measured is the best way to link rewards with effort and achievement. A performance review should be just that…a review. If it is to have any real power to motivate or modify behavior it must be linked to lessons learned throughout the year, not just to foggy memories of months gone by.

Make sure your 3-4% COLA increase and limited incentive budgets mean something this year by enhancing your process for improving your performance review. Imagine if there were no surprises other than the dollar amount. Imagine if your good employees looked forward to their reviews and your less than good knew what to expect in advance. It would improve the quality of the process while reducing the angst and preparation for something that virtually no one currently enjoys.

May you have a pleasant and high-performing 2012!

Dan Walter is the President and CEO of Performensation an independent compensation consultant focused on the needs of small and mid-sized public and private companies. Dan’s unique perspective and expertise includes equity compensation, executive compensation, performance-based pay and talent management issues. Dan is a co-author of “The Decision Makers Guide to Equity Compensation” and “Beyond Stock Options.” Dan is on the board of the National Center for Employee Ownership, a partner in the ShareComp virtual conferences and the founder of Equity Compensation Experts a free networking group. Dan is frequently requested as a dynamic and humorous speaker covering compensation and motivation topics. Connect with him on LinkedIn or follow him on Twitter @Performensation and @SayOnPay