Those who endorse pay-for-performance
may tell you it is an effective method for attracting and retaining the right people and
for nurturing an environment of continuous
improvement. Those who generally dislike
pay-for-performance systems may tell you
such a system encourages individuals to focus on personal gain or their own goals at the
expense of others, thus destroying trust and
teamwork.
On paper, it may appear that a pay-for-per-
formance system is a perfect solution for:
Attracting and retaining the best and
brightest;
Motivating people to work more efficiently;
Obtaining the firm’s strategic goals and
objectives;
Recognizing a variety of employee con-
tributions; and,
Encouraging people to help others
achieve their goals and objectives.
We have also found, however, that there
are many pitfalls in implementing a pay-for-performance system. Some of these pitfalls
are related to the design and implementation
of the plan itself, while others are the result
of cultural or operational dysfunctions of the
implementing firm. Pitfalls that we have ob-
By auguSt aquIla anD COral rICe
Pay-for-performance is certainly no silver bullet. like any management system, opinions about
pay-for-performance differ.
The second of two articles weighs the pitfalls and benefits
august aquila is a well-known author, keynote speaker and management consultant.
reach him at aaquila@aquilaadvisors.
com. Coral rice is a senior consultant with
FranklinCovey. reach her at coral.rice@
franklincovey.com.
served over the past several years include:
The plan is too complex. It includes too
many measurement criteria, hard-to-under-stand measures, or difficult formulae for calculating pay-for-performance payouts.
The plan rewards behaviors that bring
about unintended consequences. For example, the plan may reward someone for
hitting a minimum number of charge hours
without evaluating the profitability of the
work that was accomplished. In other words,
billable hours may go up while profitability
goes down.
Administrators of the plan are unable
to obtain the data needed to track the measures, or individuals affected by the plan
do not trust the sources of the data and/or
the keepers of the data. Since the plan often
includes a measure tied to behaviors, it may
be difficult to “audit” whether the behaviors
are actually occurring. Observation or self-tracking may be the only options to do so.
Employees may focus on individual
goals to the detriment of others, the team, or
the firm. This requires a close look at whether
the system can be manipulated, whether the
plan includes criteria with unintended consequences, and whether the plan includes both
independent and interdependent criteria.
The firm is unwilling to commit to the
training that is necessary for individuals
to develop the needed competencies as
outlined in the plan. Too often, firms have
job descriptions that include needed com-
petencies (some may have even developed
detailed competency maps) but fail to assist
employees in developing an individual de-
velopment plan that outlines how, when and
where they’ll learn these competencies.
The net effect of a good pay-for-performance
compensation system should be the same
for employees as it is for owners. You should
expect the following benefits from a well-de-
signed system:
Compensation increases and total com-
pensation are based on overall contribution
to the success of the firm, rather than one or
two measures of success.
The system creates a results-driven, performance culture, rather than a culture of
entitlement.
Employees and owners know with clarity their job descriptions at each level; career
progression opportunities within the firm;
compensation upside; personal goals that they
help to create; and performance reviews.
Underperformers often choose to leave
the firm on their own, and even when they
don’t, it is far easier to make a tough decision
because it is based on objective information.
All of this leads to greater personal accountability, which in turn should lead to
higher levels of productivity, efficiencies and
profitability.
FINAL THOUGHTS
Sustained success in any organization or
team more often comes about as the result
of above-average individuals who work well
with and support one another than from superstars who work well independently.
Most successes are group efforts. Nuclear
weapons, airplanes, and spacecraft that can
take a man to the moon and back were not the
results of efforts by the one, but of the many.
There may have been heroic efforts and great
individual performances, and we suspect they
were rewarded appropriately. And when we
can help individuals understand that their
contribution to the team and to the firm can
be measured and rewarded appropriately,
and that it can grow the amount available for
such rewards, we’re much more likely to see
“All for one and one for all” behaviors. AT
Avoid bad impressions in social networking
With Facebook and LinkedIn continuing to
reign as top social networking sites, who you
know is not always as important as who can
know about you. Like e-mail, social networking can lull you into a false sense of privacy
and security.
By Dawn wagenaar
Have you set the privacy settings properly on your Facebook page yet? One of our colleagues
recently had her son tagged in a photo regarding some fun he had while volunteering in South
america. It wasn’t a flattering photo and it didn’t highlight his volunteering skills.
you get the picture?
Social networking is fun, but it is no longer
just fun. You can actually use it to boost your
firm’s reputation and improve your career
prospects — or tarnish them. Take this tool
to the next level with these tips:
Use status wisely. Use the status function
on your profile to promote something you are
doing at the firm: information you are seek-
ing, an event you are attending, a committee
you have joined. It adds to your reputation to
show that you are involved, sharing and seek-
ing feedback from your network. Make sure
that use of social networking related to your
job or firm is supported by the firm’s social
media policy.
