HR director: “Well, her director has recommended a 10% salary uplift and a 30% bonus.”
CEO: “Yes, I’m happy with that, pleasant lady, had a good chat with her last week about sailing – didn’t realise she sailed.”
HR director: “He’s recommending the same for John.”
CEO: “No. Absolutely not. Doesn’t clear his plates away at lunchtime. He’s worth half that.”
It may seem unreal, but I’ve witnessed, many times, these subjective prejudiced approaches to pay and reward. And promotions too. Where available evidence is downgraded or cast aside for an emotional, subjective view. This is not The Monday Revolution way of carrying on.
At a very different company, one of our managers was absolutely clear that reward equated to performance, not their ability to talk a good game. “We’re deciding whether they’ve performed, not whether we want to go on holiday with them.”
For me, annual bonuses and discretionary rewards have no place in the companies I’m involved in. In some instances, I’m still trying to win that battle, as in many places these things are ingrained and not easily removed. But the logic for doing something better is compelling and the arguments for preserving the status quo increasingly weak.
Talk to an interview candidate about a generous discretionary bonus scheme and they’ll mostly value it at zero. A nice-to-have maybe, but who knows where the hurdles will be set and anyway doesn’t discretionary mean just that?
Work is a financial and emotional contract between a company and a person. Do these things and we’ll pay you what we agreed. Do more than those things, go the extra mile, and we’ll pay you more. We expect you to uphold the values of the company in the course of doing your work, which includes appropriate behaviour and getting on with your colleagues.
Of course, it’s possible to closely define all of these things and create an endless list of objectives, which would rather defeat the purpose of this book. So, we’ll not do that.
By applying some basic principles it’s entirely possible to have a motivated individual and team. Just make sure you’re clear about what you want people to do, agree that with them, and pay them for it. Too often, reward discussions are an annual event, geared to a review or appraisal. Never a good idea, as the 12-month gap is far too long to achieve anything remotely useful.
Here’s what I mean:
Manager: “We’re five months into the year and running 30% behind budget; it’s not looking great is it?”
Executive: “Yes. Obviously, we’re aware of that but the sales pipeline is really strong for the last quarter and we’re confident of pulling it back.”
In my experience that never happens. If the company, its target and individual PRP had been geared to shorter, sharper timeframes, a different result might have been achieved. Why? Because it would have been in their personal interest to deal with the problem earlier, that’s why.
The 12-month lead time to final achievement suits the finance director for budgeting reasons. But for the executive it’s too far away to be meaningful. Time slips away, the orders don’t come in and before you know it targets are becoming increasingly tougher to hit in an ever-decreasing window of opportunity. Everything backs up.
Much better to incentivise people or small teams on a quarterly basis, against a measurable set of objectives. The key questions are – how do we want these people to behave? What exactly do we need them to do over the coming weeks? Smart companies know this and do it. Lesser organisations, some of which I’ve been involved in, deceive themselves into thinking it will all come good in the second half. Then the last quarter. Then it doesn’t.
Agree the measures of success and reward according to performance and results. Everybody knows where they stand and there are no unpleasant shocks or surprises. Importantly, the money you’re paying out is for increased productivity. Not a post-Christmas gift which mostly disappoints.
A chief executive I work with and I devised a scheme some time ago which works pretty well, that you might want to try. We agree the tasks and priorities for the year. Everything from beating budget to promoting the company by speaking at a couple of conferences. And around ten things in between. “For 100% achievement, he can earn an additional 50% of annual salary.” The clever bit is we weight each task according to priority, so beating budget earns more than getting on stage. Following each quarter, we review progress and at the end of the year we add up the weighted average, congratulate and pay out.
This method resulted in a chief executive who agreed his priorities, reviewed them regularly with his boss and was paid for performance. It’s not rocket science, yet many companies struggle with the concept.
I remember one chairman saying, “Great idea in theory David, but it has a major flaw in it. It assumes we know what they’re supposed to be doing in the first place!”
To attract the right talent, earn a reputation for competitive pay and reward. Incentivise people to perform through simple transparent schemes. And above all, be seen to treat people fairly.
The Monday Revolution (you can start on Monday)
1. Establish market demand and reward for all your key people. Review their contracts. Keep ahead or you’ll lose them.
2. When hiring, make your advertisement, invitation, head-hunter call or whatever more appealing than everyone else’s. This will not be hard.
3. Promote what you do inside and outside the organisation. Be one of those companies you’ve heard of but rarely worked for: “No point in approaching her, too well looked after.”
4. Design a salary-based performance-related pay scheme for everybody. Yes, everybody. And if you don’t know what they do or why they’re here, make a saving.
5. Measure everything in quarterly time segments across the year. You can roll them up, combine them or whatever else but anything longer and you’ll never create momentum. Just imagine you operate three-month years if that helps.
6. Ensure appraisals and rewards are aligned. You’re paying for behaviour in all its forms. Don’t appraise people for one thing and pay them for doing something else.
Chapter 5
Who’s made the cut?
Building high-performance teams
The appetite for knowing how to build a winning team shows no sign of abating. And why would it? Winning teams, well, they win, don’t they? And whatever business you’re in, winning takes precedence.
It’s interesting in that I was raised on a different notion – “it’s not about the winning, it’s about the taking part”. In my early years that was, apparently, more than just all right. In fact, demonstrations of ambition and success, well, they just weren’t socially acceptable. Then in my adult years this unambitious mediocrity was savagely replaced by a personal world of accountability. Where winning orders, new customers or the sales prize was the only thing that counted. Failure equalled dismissal.
The Monday Revolution approach to attracting high performers requires an all-round approach. As detailed in the previous chapter, the company’s outward presentation needs to be compelling. Dull, out-dated marketing materials and a tired old website isn’t going to make the shortlist, as far as the candidate is concerned. And there’s little point in those factors working well if the job description falls short of dynamic, having been written by a trainee in the people department. Or some similar often unconnected outpost. You need to ensure your company looks like (and pays like) a business going somewhere. High performers want high-performance environments. It’s where they can raise their game and flourish.
Like so much in business there’s demand for a formula requirement that will solve the problem. And to some extent they exist. Identifying how companies have