Balancing Process and Outcomes – How “Silo” Thinking Can End Up Rewarding the Wrong Thing

Organizations that implement employee recognition and reward programs usually do so with the best of intentions. However, company leaders and HR pros must think through possible scenarios to be sure they are rewarding the right things.

Avoiding silo creation and balancing process and outcomes are the two critical areas to always keep in mind in recognition and reward program planning. (Recent Gallup research highlighted this well.) 

1) Avoid Silo Creation

The Gallup research notes that, as organizations grow and divide into various divisions and functions (silos) it becomes natural for the leadership of those groups to be concerned with the success of that function. Organization leadership must be careful at this stage to ensure silo leaders do not put the success of their particular function or division ahead of the organization. As Gallup puts it:

“They lose sight of the most important thing: the overall mission or strategy. To them, everything revolves around what's important to the department -- their ability to complete their part of the process and check off that one box, regardless of whether or not it supports the larger strategic goals.”

The Fix: Avoiding silo creation requires deliberate, intentional action to refocus attention of all employees, at every level and in every function on overarching organizational goals, strategy and values. One way to do so is through a strategic recognition and reward program that actively promotes praise and appreciation of actions, behaviors and achievements in line with those top-level goals and values, not just functional goals.

2) Balance Process and Outcomes

Gallup explains that silos form in organizations as functional groups or divisions create rules or processes to support achievement of their division’s goals, building walls that block their vision into organization goals. Gallup illustrates this point with a story about a financial services company that implemented cost control. The supply department in particular was under pressure to control costs and so implemented a moratorium on all supply orders. Local managers in need of basic supplies would work around this by bartering with each other for needed supplies. End result: “And for several hundred dollars in shipping between branches, the company saved the five dollars that the paper cost at the store. Nevertheless, the head of supply was recognized for keeping that department's budget under control.”

This mirrors a similar story of rewarding outcomes over process that I told elsewhere: 

“Call centers will often set up reward structures based on call time or number of calls handled within a set amount of time. Yet such practices merely encourage representatives to get callers off the phone as quickly as possible, not necessarily giving the customer the level of service or help they truly require. So the representative is rewarded on poor customer service and a potentially destroyed customer relationship.”

The Fix: Balancing process and outcomes requires clear communication of the overarching values and goals. For example, if a company value at a manufacturing firm is “environmental stewardship,” then an employee would not be recognized or rewarded for delivering a key project under budget but only doing so by releasing excessive pollutants into the environment. Leadership must carefully consider these tradeoffs and build them into a strategic recognition program with overall organizational goals and values as the reasons for recognition.

What other common pitfalls have you seen in creating employee recognition and reward programs?

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.

Comments

[E James (Jim) Brennan]

The ancient cascade process of goal-setting and comprehensive enterprise-wide communication is necessary to prevent perverse incentives. A close friend wrote his PhD dissertation in the 1960s on the negative correlation between short-term ROI change and corporate profitability: managers sold off all their assets, got big bonuses and moved on before the roof fell in. The second problem with incentives is that you get the behaviors you reward.

[Laura Schroeder]

It's true that many rewards motivate people to make their own area successful. A well-balanced rewards program motivates people to act in the best interests of the entire company. Much harder. Much cooler.

[Derek Irvine, Globoforce]

Great points, Jim and Laura. Rewards programs must be very carefully structured or you reward the wrong things. I once wrote about a common scenario:

Call centers will often set up reward structures based on call time or number of calls handled within a set amount of time. Yet such practices merely encourage representatives to get callers off the phone as quickly as possible, and not necessarily give the customer the level of service or help they truly require. So the representative is rewarded on essentially poor customer service and potentially a destroyed customer relationship.

But Dilbert told it better in the strip here: http://www.recognizethisblog.com/2009/10/are-you-rewarding-bad-behavior/