Return to Articles & Newsletters

Welcome to the May 2010 issue of Alignment Solutions! Here are three of the things going on this month:

  • A new e-booklet containing my best advice on allocating resources and setting priorities is available without charge on the Business Alignment Strategies web site. Click here to request your copy of From Confusion to Clarity: How to Prioritize Scarce Resources.
  • To complement the launch of our e-booklet, we are offering a free teleseminar in early June on how to increase the quality of your life by setting and implementing your personal priorities. Your employees can benefit from this information as well - and make your job easier! How? Workers who do what they love are more highly engaged, productive, and committed than those who view their job as something to be tolerated. Watch for details of this call if you are interested in learning what steps you can take to a higher quality life.
  • After a short hiatus, our Research News You Can Use series is back! Each month, we select an academic article whose findings are applicable in the workplace, report the key findings, and suggest ways that you can implement them in your organization.
  • May Topic: Optimizing the ROI of Team Rewards

    Premise: Are you satisfied with the ROI (return on investment) you get from resources spent to improve team performance? If not, you may want to examine how you allocate team rewards. The results of a recent study form the basis for our suggestions about how to optimize the effectiveness of rewards for team task performance.

    This month’s theme is “optimizing your compensation ROI.” One of the ways to do this is to think of compensation in very broad terms, including both rewards and recognition. Another is to apply relevant compensation-related concepts to your personal life. Find out how you can dramatically improve your organizational and personal ROI at little or no cost.

    The Feature Article, “10 Things Every Employer Should Know about Compensation Systems,” explains how you can increase productivity, employee engagement, and commitment to organizational goals by making some simple yet profound adjustments to the way you reward and recognize your employees.

    In “Why Recognition is More Effective than Monetary Rewards,” the Business Solutions section makes the case that employers who choose not to establish a recognition program are short-changing their employees and their stakeholders unnecessarily. We offer several ideas for no- or low-cost forms of recognition.

    In the Personal Solutions section, “How to Optimize Your Personal Rewards/Recognition ROI” challenges readers to increase the quality of their lives by rewarding and recognizing their achievements on a regular basis, and offers six ways to do this.

    I invite you to visit my web site at www.BusinessAlignmentStrategies.com and my blog at www.OptimizeBusinessResults.com to find other articles and resources that may be of value to you and your colleagues. I welcome your feedback!

    Do you know someone who could benefit from the value we provide? If so, let’s create a win-win-win situation! Contact us about how we can make this happen.

     

    Return to Top

10 Things Every Employer Should Know about Compensation Systems

Few executives and business owners are aware of the power of their compensation systems to focus attention on, and to drive, organizational goals. In addition to failing to optimize the allocation of their financial resources, they are settling for lower than necessary levels of productivity, employee engagement, and commitment to organizational goals. Here are ten suggestions that every employer, regardless of the size of his/her organization, should consider.

1. Align pay with organizational goals.

Make sure that the performance you are rewarding supports the organization’s mission and goals. For example, if you want employees to act as a team but you pay them based on their individual performance, guess what you’ll get?

2. Make sure you communicate the message you want your compensation system to send.

Every compensation system sends a message to employees. Make a conscious decision about what message you want to send, and ensure all elements of the system are aligned with it. For example, if management says, “Employees are our greatest asset” yet pay levels are below market average, what message do you think the employees receive? If you don’t shape the message, your employees will - and the results may dismay you.

3. Think broadly.

Define “compensation” as including more than just pay and benefits. I encourage my clients to use the term “total rewards,” and to include everything that rewards or recognizes employees for their performance. This approach gives management a great deal of latitude to show how much they value individuals’ contributions to the organization’s mission, even during times of economic uncertainty.

4. Leverage the power of recognition.

In my experience, recognition is a “best kept secret” in the workplace. As a result, it is seriously underutilized in most organizations. This is a huge mistake, as (a) there are hundreds of no- or low-cost ways of recognizing employees, and (b) employees tend to remember a form of recognition long after they have forgotten a monetary reward. I advise my clients to find out what non-monetary forms of recognition are meaningful to their employees (e.g., autonomy, challenging work, the ability to learn new skills), and incorporate them liberally into their total rewards system.

5. Connect rewards with performance that employees can control or influence.

Few things are more de-motivating to employees than being offered rewards for achieving outcomes over which they have little or no control. For example, I have seen employers make individual bonuses contingent on completing projects that require things outside of the employees’ control, such as key input from others, approval by management or other decision-makers, or funding. You are better off not offering any reward at all. In addition, I generally advise clients against companywide annual profit sharing programs, partly because the majority of employees cannot connect their performance clearly with the payouts they receive. This type of program does little or nothing to create a motivating environment, so from a strategic point of view, those compensation dollars are wasted.

6. Watch the timing and form of rewards and recognition.

To maximize limited resources, management should pay attention to the timing of rewards and recognition. Desired performance should be rewarded as quickly as possible: employees will see the cause-and-effect relationship, and will be more likely to repeat the behavior. Annual bonuses, such as profit sharing plans, are notoriously ineffective (except possibly at a senior level) in helping employees make this connection. In addition, bonuses should be one-time lump sums rather than increases to base pay. The effect of the latter is to reward employees in perpetuity for something they did well at one point in time.

7. Establishing a clear line-of-sight is priceless.

You have established a clear line-of-sight when every employee is able to articulate clearly the contribution he/she makes in achieving your organization’s mission or goals. When this happens, you will have a workplace in which people are engaged, motivated, committed to organizational goals, creative, and have high morale. Money cannot buy this type of environment.

8. Ensure the compensation system is procedurally fair.

Managers often cannot control the outcomes of the compensation system - i.e., the amount of pay they can provide. However, there is one key factor over which they always have control, namely the process by which rewards and recognition are determined. Research and experience demonstrate that when employees perceive that the process by which they are paid is fair - e.g., it is transparent, free of bias, and allows for their input - they will accept the outcomes even when they are not entirely happy with them.

9. Formalize the system, then don’t mess with it.

Once you have established your pay structure(s) formally and identified clearly how and when pay and other forms of rewards will be adjusted, do not change it arbitrarily. While I advise clients to conduct annual reviews to ensure the system still is aligned with their goals and to determine whether structure-wide pay increases are appropriate, that’s all that should change. Your compensation system is a reflection of management’s strategy and its philosophy about how it values its employees. These things should be relatively stable. In addition, employees should be able to understand how and on what bases they are paid.

10. Implement an excellent and measurable communication plan.

No compensation system can succeed without a clear, concise, and comprehensive communication plan. The plan should cover the development and on-going administration of a compensation system, as well as changes that occur over time. Here are two measures of such a plan: (a) every supervisor and manager is able to explain it accurately and clearly to their staff, and (b) individuals can articulate how and on what bases they are rewarded and recognized.

Return to Top

Why Recognition is More Effective than Monetary Rewards

Consider this scenario: A business owner asked her employees to work long hours to complete a “rush” project for a client. As a result of their efforts, the project was completed a few hours ahead of schedule, and the client was delighted. Wanting to show her appreciation for employees’ hard work and knowing that they all had families with young children, the owner decided to provide each worker with a family pass to a local theme park. Why? The entire family would have life-long memories to share and treasure, instead of the employee’s fleeting memory of a monetary bonus.

Managers who have discovered the “secret” of an effective recognition program know just how powerful simple forms of recognition can be. Effective programs can result in outcomes such as engaged employees, increased productivity, greater creativity, and commitment to the organization’s success. An abundance of research shows that while money is an issue in terms of motivating and retaining employees, it seldom is the issue. Most people are looking for meaningful forms of recognition such autonomy, challenging work, and the ability to learn new skills.

I can make a case that employers who do not implement recognition programs are short-changing their employees and stakeholders. Such programs can be simple and low- or no-cost. However, there are some critical success factors required for the programs to be effective. For example, the recognition must:

  • Be customized for each individual (e.g., no public recognition for a person who shuns the spotlight).
  • Be linked explicitly to the desired performance or results.
  • Inspire the desired type of performance (e.g., individual recognition for individual effort).
  • Include criteria that are easy to understand and evaluate.
  • Be contingent upon results that are perceived as achievable.

There are literally hundreds of formal and informal ways that employers can recognize employees at little or no financial cost. Here are a few examples:

  • A heartfelt “thank you” delivered either in person or in a handwritten note
  • A thank you note sent to the family
  • Tickets to events (e.g., plays, movies, sports events)
  • Gift certificates for items of value to the honorees
  • Gift for spouse and/or family
  • Public recognition (IF appropriate)
  • Lunch or other personal time with the CEO or other executive
  • Executives serve lunch to employees

In short, the possibilities for recognition are limited only by one’s imagination. Given the huge ROI on recognition programs, it makes no sense for any organization to be without them. So what will you do to recognize your employees today?

 

Return to Top

How to Optimize Your Personal Rewards/Recognition ROI

Do you reward yourself on a regular basis? If not, why not? If you do, give yourself a pat on the back - or whatever form of recognition works well for you. Paradoxically, perhaps, most people work best when they take the time to care for themselves. This includes rewarding themselves on a regular basis. Yet to many people, doing so is a foreign concept. As it happens, several of the suggestions I made in the article 10 Things Every Employer Should Know about Compensation Systems can be adapted to our lives outside of work. Let’s take a look at which of these factors can be applied to one’s personal rewards/recognition program.

1. Identify the types of rewards and recognition that you value.

I’ve been surprised at how many people are unable to identify easily the types of rewards and recognition that they value. When prodded, they often come up with things that they have seen or heard others do - or they draw a blank and cannot answer the question at all. The first step in creating an effective reward/recognition system for yourself is being clear on what you want and need. This may require some outside-the-box thinking! Consider things that are meaningful to you and require little or no cost, such as taking a walk in nature, reading a good book, getting together with friends, or simply relaxing.

2. Align rewards/recognition with personal goals.

Make sure that the things you are rewarding support your personal mission and goals. For example, if your goal is to lose weight, you might want to stay away from rewards that involve high calorie foods.

3. Experience the power of recognition.

The workplace is not the only context in which recognition is a “best kept secret.” It also is seriously underutilized by many individuals, who fail to give themselves credit. Why is this? Perhaps they don’t view their accomplishments as anything out of the ordinary (e.g., the “It’s just my job” syndrome), or they discount their contributions, or they haven’t completed the task or project yet, or they think they’re too busy to take the time to celebrate. I have some advice for those who think that way: stop it! Start listening carefully to what others praise you for, and take ownership of the things they say you are really good at doing. Ask close friends or family members to identify some of your best attributes or accomplishments. Do not wait until you are finished a task or project to reward or recognize yourself; making progress is worthy of recognition as well. Incorporate meaningful forms of reward and recognition liberally into each day.

4. Connect rewards with performance that you can control or influence.

Few things are more de-motivating to people than being offered rewards for achieving outcomes over which they have little or no control. So why do we do this to ourselves? I often see people set totally unrealistic self-expectations, then deny themselves a reward because they were unable to achieve them. My advice, again, is to stop this dysfunctional pattern of behavior! You are only wreaking havoc on yourself and diminishing the quality of your life. Instead, make sure that the goals you set for yourself are achievable. Break medium- or long-term goals into shorter pieces and celebrate your progress as you move along the path to completion.

5. The timing and frequency of rewards and recognition are important.

Desired performance should be rewarded as quickly as possible to reinforce the cause-and-effect relationship, which will make you more likely to repeat the behavior. As noted above, waiting till the end of a long-term project or goal before you reward yourself is not very motivating.

6. Formalize your personal reward/recognition system and review it periodically.

It is important to incorporate rewards and recognition into your life on a daily basis. Why? First, you deserve to pat yourself on the back for your efforts and accomplishments. Second, rewards are fun! Third, they can create a motivating environment that inspires you to do your best. I recommend that you review your system periodically to make sure it still is serving you well. For example, over time your preferences may change, or something new may catch your attention. Make sure that your system is working effectively for you.

 

Return to Top

Date of Publication: May 2010
Pat@BusinessAlignmentStrategies.com
www.BusinessAlignmentStrategies.com | 562.985.0333
Copyright 2010 - All rights reserved, Pat Lynch