Posted by Chuck Csizmar | Posted in Articles, Universal Compensation | Posted on 09-01-2014
It’s that time again. The end of the business year, when managers everywhere turn their thoughts to – bonuses! The calculators are out and every eligible soul from Marketing to Manufacturing to Sales, IT, HR and the Executive Suite tries to figure out how fat that check will be. For many, it’s the gift receiving season.
And thus the same bad script repeats itself for the annual management incentive process, year upon year upon year: objectives created at the last minute, embellished accomplishments artfully recorded, problems and shortcomings diminished or forgotten and assessment forms looked at with bureaucratic disdain – as in, how do I fill out this thing to pump up my results?
More than the mechanics are at fault
Oh yes, the process is flawed, yet the foxes are in charge of the chicken coup – and they offer little hope for reform. Why? For those in charge the process works, and self-interest pays its own rewards. Picture a belated Santa Claus with a large bag of goodies.
Cynical? You bet. For many of us in the trenches true pay for performance is 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 manipulate or adjust financial results to ensure that their own incentive awards wouldn’t be reduced. Senior staff deserves competitive incentives, don’t they? How can you not reward your senior leadership for their efforts? And so once again entitlement trumps performance.
Studies suggest that the I-deserve-it mentality has weakened through this recession and slow recovery. However I’m convinced that it’s still alive and well wherever rewards are viewed as payment due for time served and effort, not results.
But we go on hoping, one company and one client at a time, 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 earned, 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?
End of year expectation
Have you ever told an executive that their annual incentive might be reduced because of either corporate or individual performance didn’t meet expectations? They would look aghast at the possibility. I’ve taken calls from spouses asking when the money would be available (post Christmas sales) – who then grew upset when told of the review process and that the Board of Directors has to approve. The common attitude was, times up! – where’s the money?
Will the situation be any different for the bonus cycle in 2014? I hope so, but 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 stand up and speak up. The process is starting now, so it’s not too late to have an impact, to instill a management pay-for-performance philosophy in your company – 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 and measureable 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”?).
· Confirm that the language on the assessment form corresponds to the performance rating. Oh yes, you have to check.
· Assessment forms should be required before an incentive payment is made – negating an old procrastination trick (“oh, just process the check. I’ll get the form to you . . . tomorrow or the next day”).
· For the 2014 cycle, start by having objectives established early in the year, not in an after-the-fact rush at the end
Granted, you’ll need more than a steely look and a waving flashlight to stop a speeding freight train, so you should educate management about their ineffective and wasteful practices before the cycle starts. Because afterward is usually too late; discipline as a learning tool is best used to prevent problems, not when Santa is already reaching into his bag of checks.
Maybe this can be your New Year’s resolution?