OK, so these are not my thoughts, but this video from RSA, based on a talk by Dan Pink is brilliant. If you never get around to reading Dan Pink’s book “Drive: The surprising truth about what motivates us”, spend the next 11 minutes watching this amusing animation from RSA:
A really good, entertaining summary of what motivates us!
I guess that before I give you more of my thoughts on this, you need to think about what you’re trying to achieve. If by relating performance to pay, you are trying to motivate your people to work harder, then you should first understand whether they’re driven by money! If they are, and you can really measure their performance, then stop reading this post and carry on as you are!
Still reading? Good! What I’m about to say may be a little controversial, but bear with me. Improving the performance of all of the individuals in your company might not improve the performance of the company! You can have everyone working as hard and as they possibly could, using whatever means you can think of. Unless they’re working together, all pulling in the right direction, then they may as well not bother. Putting it that way, may make more sense to you. W. Edwards Deming wrote in “Out of the Crisis” ‘A new book explains how to “Motivate your people to work at top speed!” Beat horses and they will run faster – for a while.” This book was first published in 1982, so it is still a surprise to me to still see performance and reward being used to “improve company performance”.
Instead of focussing on the performance of the people, I encourage you to look at what it is they actually do. This might be uncomfortable for both you and them to start with, but if you can manage to convince them that you’re looking at what they do, to be able to see how you can help them to make their job easier or less frustrating, then you’ve taken the first step on the business improvement ladder. More about that will appear in another post.
Back to the relationship between performance and reward. If you already link performance to pay rises and bonus payments, you need to make some changes as soon as you can. If your company pays bonuses based on performance, find a way of relating them to the performance of the company; larger organisations could split this down to the performance of business units, but this also has risks. Whatever you do, make sure that the performance measures are seen to be fair. The biggest risk is that business units may compete against each other, rather than working together for the good of the business. Keep it simple, focus on the bottom line; the best-case-scenario is that everyone in the business receives the same bonus, either in percentage terms, or in monetary value.
What to do about the performance of individuals? Use your Leaders to lead! Train the leaders at all levels in the business to understand what leadership is, and how it differs from management. Give them the time to coach their teams. Get the teams working together. Creating the right environment, from the front-line to the boardroom, with the right leaders in place is the only way forward.
I’ll leave you with this thought. If you take the time to look at the processes that operate in your business, and listen to the people involved in those processes, then you’re heading in the right direction to move your business forward.
Go on, take the first step!
Does your business use annual performance management reviews?
I’m assuming that, because you’re reading on, you answered yes to that question. I’ve been the subject of and have delivered many performance reviews, and have always struggled to understand the value of these annual rituals.
Why do we do this?
Is the purpose of the annual review to help individuals identify how to perform better in the future? Is it designed to set their annual bonus and pay award? It may well be both of these, in which case, can you really expect your team to be honest and open in their own assessment of their performance? If they know they had a challenging year, from which they’ve already learned by their mistakes, are they going to remind you about this, or will they tell you about all of the good things that happened? I know what I’d do!
I’m an employee, a manger and a human being!
As an employee, I’ve always sought and acted on feedback from others around me, so why do I need to be reminded of the mistakes that I made 11 months ago, or the successful completion of a project last week? The answer is usually that my salary is related to my sustained performance, and that the company bonus scheme pays out a princely sum, based on my performance last year. Will my manager play up the positives or remember the negatives? I’m nervous now!
As a manager, I try to coach my team throughout the year, leading them through the difficult times and celebrating their successes with them. I have to assess their performance over the year on a 3 or 5 point rating scale, and remind them of their highs and lows over the year. This is something that I struggle to with, as a manger; performance across a 12-month period has a natural variation, yet I’m expected to summarise this variation with a single rating. I feel sorry for my team members who had learned from their mistakes, yet will receive a lower rating than they feel they deserve, despite having shown improved performance since that error of judgement earlier in the year.
As a human being, I suffer from bias. I am programmed to remember bad things; I remember bad or dangerous events for self-preservation. As a human being, I like some people more than I like others; I can’t help it! The impact of this as me as a manager is that I going to fail to give an objective view of my team members’ performance. I can’t help it, it’s just the way I was made.
What’s the result of all this?
My experience of such systems is that we rarely feel that my performance was assessed objectively. Personally, I’ve had reviews that rated my performance below what I thought it was and, perhaps more surprisingly, above my expectation. It was the latter experience that made me wonder whether there was any real value in performance reviews. Does the fact that my annual bonus is related to my personal performance over the last year make me deliver higher performance? No, of course not! What it does to me, and many others around me, is to demotivate us when it is not as good as we had hoped! I’ll discuss this problem another time!
The good news!
There is a solution, however. Throw away the annual performance review and coach your teams throughout the year. If you must pay a bonus to your staff, link it to business performance. I have been part of an organisation that paid its staff a fixed annual bonus based on the company’s performance. Every member of staff got the same bonus; that seemed to be much fairer than more complex system, based partly on individual performance.
I’m sure that you may think that there are serious risks with taking such a bold step, but ask yourself, what would you gain by not having an annual performance management cycle?