I
feel a rant coming on.
In
the last couple of weeks the broadcast media has been awash with stories of
Executive's being paid average bonuses, over and above salaries, of £8,000+
irrespective of whether they have performed or not.
This
bit of information caused vast amounts of righteous anger among journalists at
the thought of poor performers being so remunerated.
However,
the sound bite made me realise that there were more questions than answers so
that it would have some meaning.
First
of all, which companies gad been surveyed (almost certainly FTSE listed and
probably banks)?
Secondly
precisely how had they measured performance?
What was the break level between good and poor performance?
Nobody
in the media even questioned the methodology and took the information at its
face value which is, of course, at least suspect and at worst, rubbish.
It
was a complete mishmash of inaccurate percentages, averages that mean nothing
and conclusions that were specious.
However
it did cause me to think about the whole contentious subject of bonuses,
commission, incentives and the like.
When
considering whether to use financial pressure to improve performance in a
business it us valid to asked whether it is as a reward or a bribe and, more to
the pint, what success can we anticipate?
At
this stage it is a good idea to take a look at a video by Dan Pink (You Tube "RSA
animation Dan Pink") in which he explains the research that has discovered some
sobering thoughts about incentives.
In
short if a task is absolutely routine and mechanical then payment by results
works. However if there is even a modicum of intellectual input, then not only do
they not work, they actually contribute to reduced performance.
Tell
this to any sales manager with a commission incentivised sales force and he
will have to go and lie down in a darkened room.
Bonuses
are even more contentious. More often than not they are discretionary which
means that nobody believes the basis on which they have been calculated. The
dreaded word "favouritism" can be heard in the land.
Even
worse, if they are distributed across the board irrespective of status or
performance then they simply become an addition to the salary. Then what
happens if there is a bad year and the bonus reduces or eve disappears?
I
had an experience where one of my Vistage CEO Group members had put in a rather
complicated sales commission scheme. The idea was designed to
"ensure" that the sales people sold products right across the range
instead of concentrating on one or two that were easier to sell.
He
saw the Dan Pink video, was harangued by the group and returned to base to drop
the scheme which was greeted with relief by the sales force.
The
best sales force I know which included the venerable Phil Copp, the sage of
Wythenshawe, was 120 string and UK national.
There
was no commission, no incentives, no bonuses but the sales personnel were
treated like grown-ups and given every encouragement to succeed. Salaries were
probably a little higher than the market rate and that was that.
The
fact is that financial incentives generally cause more problems that they
solve. People react positively to being
treated positively, to encouragement, to recognition of them and their
performance, to achievement and above all to a sense of purpose.
It
is a matter of culture. If we treat our people as being coin-operated then that
is what we will get with a transient workforce that will move for more money
On
the other hand if we treat people with a concern for them and their place in
the business, then we can expect a far more positive result and a more stable
workforce.
Rant
over, I feel better now!
Author of "Leading to Success" on Amazon Kindle
Visit the Vistage UK website
No comments:
Post a comment