This is What Happens When You Pay For It

This is What Happens When You Pay For It

If it’s not in the compensation plan it won’t get done.

If you don’t pay employees to further the strategic goals of the organization, they won’t be achieved.

That’s a fact; that’s the reality.

Why do you think sales bonus plans are so pervasive?

It’s all very well to strike an audacious goal and throw it out to the organization expecting employees will somehow identify with it, get excited about it and do whatever is necessary to implement it.

But this view is a colossal pipe dream.

The challenge for leadership is to make strategic objectives meaningful at the individual employee level.

Lowering a high level nonspecific organizational end game on employees creates dysfunction at best; everyone is forced to invent what it means to them in their particular role.

Typically different people come up with different interpretations; confusion results and little if any progress is made.

To make the strategic purpose a reality requires 2 fundamental steps.

  1. Translate the critical components of the organization’s strategy to what it specifically means to each function. What does sales, marketing, engineering and finance have to do day-in and day-out to deliver the expected results?
  2. Incorporate the specific deliverables into each employee’s annual performance and bonus plan.

Some organizations attempt to translate their high level objectives down to lower levels but few actually integrate them into the bonus plans for the many positions in its organization structure.

The human resource function is not responsible to make this happen.

It’s a leadership responsibility because aligning and motivating employees are key to execution; without strong performance in this area, little progress is made.

7 steps to integrate strategic objectives into the compensation plan of the organization.

  1. Keep the number of objectives to 3 at most. People can’t achieve meaningful progress when they are assigned a grocery list of deliverables.

Determine a few critical objectives that will achieve 80% of the results expected and avoid taking on “the possible many” things that might be related to strategic outcomes expected but are not vital.

  1. Prioritize the objectives; make it clear what the pressing need is and where expected results MUST be delivered. This defines the absolute minimum set of expectations that are acceptable to leadership.
  2. Weight the priorities to influence where people spend their time. Not every objective has equal import on the strategy and this should be reflected accordingly. If the top priority is given a weight of 60/100, for example, it will command the majority of a person’s time.

This is critical. If people are left on their own to determine how to allocate their time, they will most likely get it wrong, or at least there will be “attention spray” in the workplace resulting in inconsistency and dysfunction.

  1. Regularly review—with each employee—the results they have achieved versus the objectives they’ve been assigned quarterly or more frequently if the nature of the strategy is significantly different from the old plan.

The only way to make strategy execution matter to people is to keep progress achieved constantly in front of them. Occasional review sends the message that the strategy of the organization isn’t really all that important and that leadership has other more important matters to attend to.

  1. Provide whatever leader support is needed to remedy off target performance. Quite often barriers get in the way of making progress; eradicate these immediately. If no leadership intervention is seen, the message to the workforce is that leaders aren’t serious about making it easier for employees to succeed.
  2. If necessary, tweak the objectives mid-year if results are coming in considerably below objectives. It’s extremely important to keep employee motivation high and if people believe the goal is impossible to achieve, they will shut down and little progress will be made.

As a rule of thumb, if the results for a particular objective were below target by more than 30% after 6 months of the plan, I would consider making a target adjustment.

However if the target were lowered, I would also reduce the potential payout amount as well.

  1. Celebrate successes and learn from failures. NEVER repeat mistakes; ALWAYS repeat what worked. Again, regular recognition reinforces the importance of achieving the organization’s strategic goals and enhances employee engagement to keep working hard to make progress.

You get what you pay for. If strategic goals aren’t tied to how people are paid, they won’t be achieved.

Photo Credit: perzonseo Flickr via Compfight cc

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