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Reward System Increasing Performance and Creating Happier Employees |
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by Vadim Kotelnikov, Founder, Ten3 Business e-Coach, 1000ventures.com
"You get more of the behavior you reward. You don't get what you hope for, ask for, wish for of beg for. You get what you reward." - Michael le Boeuf
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Why Reward Systems? The only way employees will fulfill your dream is to share in the dream. Reward systems are the mechanisms that make this happen. "However, reward systems are much more than just bonus plans and stock options. While they often include both of these incentives, they can also include awards and other recognition, promotions, reassignment, non-monetary bonuses (e.g., vacations), or a simple thank-you."5 "The journey is the reward," said Steve Jobs. You Get What You Reward The greatest management principle is that the things that get rewarded get done. "You get more of the behavior you reward. You don't get what you hope for, wish for or beg for. You get what you reward."7 When your employees do hit the target and meet a stretch standard you set for them, reward them immediately. Never stall. By doing this, you help employees directly connect the reward with behavior and higher performance they've attained.4 "Fail to reward the right behavior and you will most likely get the wrong results."3 Stimulating Entrepreneurial Environment Your reward structures providing "a high upside for the success, and at the same time a downside for the failures help to encourage managers to stimulate an entrepreneurial environment."5 Linking Pay with Performance Great managers create heroes in each role and link pay with performance. "They create broad bands for pay within each role. They also create overlapping bands of pay to encourage people to assess their strengths before moving to the next rung on the ladder. This means that a great salesperson could earn much more than a new sales manager who is yet to demonstrate performance in his role."6 Case Study: Intel At Intel, rewards are clearly linked to performance. About half of pay is tied to company and/or divisional performance, and more than 70% of employees have rights to purchase stock options. The way Intel management sums this up is, "The reward system reinforces the company's high expectations of its employees to grow, learn, and lead."1 Case Study: Monsanto At Monsanto, when it started its transition from a chemical giant to a life sciences company in 1995, reward systems have been redesigned to focus on growth and instill a sense of ownership in the corporation. In 1996, Monsanto granted stock option to the 95% of employees who previously didn't participate in a stock-option program. In 1997, Economic Value Added (EVA) was adopted as the primary measure of financial performance. Incentive plans are tied to EVA, and employees eligible for management incentives have had a portion of their incentive converted into option.1 Case Studies: Dell Computer Corporation "At Dell, the vast majority of our employees are owners as well, a result of employee stock purchase plans, stock option grants, and a 401(k) plan in which we match employee contributions not with cash but with company stock," says Michael Dell, CEO of Dell Computer Corporation. "Stock ownership in the computer systems business is nothing new At Dell, though, it comes with another commitment. To be an owner, you have to think like one. The personal investment people feel when they think and act like owners manifests itself in a true commitment to the company. I'm surprised that most companies offering stock to their employees have missed this critical point."3 |
Bibliography:
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"The Centerless Corporation", by Bruce A.Pasternack and Albert. J. Viscio, 1998
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"Driving Growth Through Innovation", Robert B. Tucker, 2002
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"Motivate to Win", Richard Denny, 2002
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"How To Motivate Every Employee" Anne Bruce, 2003
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"Leading on the Edge off Chaos", Emmet C. Murphy and Mark A. Murphy, 2003
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"Four Keys to Great Managers", The Gallup Organization, 2003
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"How To Motivate People", Michael le Boeuf
