Category Archives: Effective Leader

Celebrate Accomplishments, Not Pay

Posted on by
Reply

(Part 5 of 5 on Employee Pay)

Of course, you should pay employees well.  Money may not be a good motivator but it can certainly be a treacherous turn off.  Decades ago, Professor Frederick Herzberg, identified pay as a dissatisfier.  For example:

“Surveys say that pay is not a motivator.  Why are you upset?”

“Because you told me I was a good hand but my merit increase average.”

“I like your product but I can’t join your company.”

“Why not?”

“Your pay scale is about fifteen percent below the market.”

Laszlo Bock, of Google, Inc., agrees that you should pay well but put the focus on celebrating accomplishments.

For example, a supervisor promised her team pizza after work for completing a project.  A superintendent created a watermelon party for achieving a performance metric.

Managers, after a good year, organized a steak dinner for employees.  One manager asked his group if they would like anything special.  “Yes,” said an employee, “we like for the management team to serve the steaks.”  They did.  All had a good time.

The manager of a service department organized a pancake and sausage breakfast for improved customer service scores.  Think celebratory events, concert tickets, VIP parking, free books and seminars, and of course hand written notes.

 

Managers Should Not Discuss Salary During Appraisals

Posted on by
Reply

(Part 4 of 5 on Employee Pay)

“I think annual merit pay increases should be tied to employees’ productivity,” stated a manager.

“I agree,” I responded.

“I also think,” the manager continued, “that appraisal interviews should focus on employee development.  But it seems that during my appraisal interviews, all employees want to talk about is the amount of their raises.”

While many organizations consider both performance appraisals and salary reviews on an annual basis, they should not be combined.  Pay raises, or lack thereof, communicate strong messages to employees.  Salary discussions during appraisal interviews bury attempts of meaningful employee development conversations.

Consider appraisals and salary reviews to be related but separate.  I like quarterly appraisals where managers discuss where employees have performed well and what they might improve upon.  The appraisal at the end of quarter four builds on feedback given and received during the first three appraisals.

Approximately two weeks after the fourth appraisal, managers can report annual merit increases individually to employees.  There is no need to mention appraisal information when communicating pay increases.  Employees are very insightful.  If managers have been candid during appraisal interviews, employees will connect the dots between productivity and salary.

 

Pay Your Top Producers More–A Lot More

Posted on by
Reply

Part 3 of 5 on Employee Pay

After a rousing success, an entrepreneur decided to sell his company to a large conglomerate.  Negotiators from the purchasing company, marveled at the entrepreneur’s achievement but gasped at the vast differences in pay among his employees.

Suspecting favoritism, a negotiator commented, “Your pay scale seems to be out of whack.”

“What do you mean?”

“You are paying some people a whole lot more than others, although they are doing the same jobs.  Why is that?”

“Well, some people produce a lot more than others.  I take care of my stars.”

The entrepreneur spoke truth.  Research by professors O’Boyle and Aguinis shows that top producers in most groups do indeed produce more—a lot more—than average employees.  A few high producers pull the average up, making most employees below-average.

Still most pay distributions follow a normal curve which makes the pay scale unfair to the very best producers.  For instance, assume twenty employees in a group. In most departments, about ten employees would receive above-average pay and ten would receive below-average pay.

You want to pay fairly?  Then pay your very top producers at least three to four times more than you pay average producers.

 

 

 

 

 

Be Wary of Using Financial Incentives to Motivate

Posted on by
Reply

Part 2 of 5 on Employee Pay

I believe in “pay for performance.”  That is, higher performers deserve greater pay.

However, financial incentive and bonus systems often result in less performance plus other unintended consequences.

Psychologist Sam Glucksberg, in his famous candle experiments, predicted that cash awards would motivate teams to produce better solutions faster.  However, the opposite occurred.  Teams that had opportunities to earn larger cash awards actually took longer to complete their work.

A number of studies in actual companies show that financial incentives often lead to less, not more, performance.  Additionally, incentives may encourage jealously, turnover, and cheating.

In an effort to improve food quality, a large canning company offered bonuses to employees who found insect parts in their food products.  Guess what happened.  Employees started bringing insect parts from home, tossing them into the process and later discovering the parts and claiming bonuses.

For very repetitive work, incentive systems may actually increase performance.  But for assignments that require problem solving, incentives change the focus from “get the best solution” to “do what you have to do to get the award.”

What then is the best way to reward high producers?  How about just paying them more based on managers’ judgements?

Does Your Pay System Encourage Your Best Employees to Quit?

Posted on by
Reply

Part 1 of 5 on Employee Pay

After receiving notice of his merit increase, Maddox said to Julian, his manager, “I really like working here, but I guess I don’t understand why my increase is so small.”

Julian responded, “You are an excellent producer but you are already one of the highest paid members of my staff.”

“I’ve heard we’re paying a couple of new employees at salaries that are pretty close to mine.”

“There may be some salary compression due to a tight market for skilled recruits.”

“Then it seems like the rational thing for me to do would be to quit.”

Most merit pay systems are zero sum, meaning that if you give higher percentage increases to some employees, you have to balance that by giving lower percentages to others.

Zero sum systems encourage managers to avoid high percentage increases.  Managers do not like explaining to disappointed others why their increases are only average or perhaps below.

Most internal pay systems compound the issue by setting upper limits for particular skills and by paying more for new hires.

Laszlo Bock, author of WORK RULES, says “In a misguided attempt to be ‘fair,’ most companies design compensation systems that encourage their best performers and those with the most potential to quit.”

Act as a Catalyst to Motivate Others

Posted on by
Reply

“I work hard to motivate my employees,” lamented a manager. “I pay them well, they are trained, and I express my appreciation frequently.”

The manager continued, “I expend a lot of energy pounding the pavement in search of fresh motivational events. We do holiday events, celebration parties, landmark events, hams for the holidays, and end-of-the-year awards.”

Perhaps there is an easier way. Researchers Buckingham and Coffman suggest that managers think “catalyst” as a way to create “ooh” and “ah” performances. From your basic chemistry class, you recall a catalyst is a substance that speeds chemical reactions in other agents.

Actions of catalyst leaders might include asking for opinions, listening, encouraging, energizing, removing obstacles, and ensuring that employees have the tools they need.

Of course, training, recognition and financial rewards are important. However, these tools are ineffective for employees who lack the talent and drive to perform.

Try rolling the cosmetic dice. Find people who want to do what you need and clear the path for them to proceed. As one manager said to a recruit, “If you are looking to me to motivate you, you are probably not the hire I’m looking for.”

Use Nudges to Influence Reluctant Responders

Posted on by
Reply

“I want to tell you a success story.  I became frustrated with an employee in another department.  I had to complete a monthly report which required information from the employee.  Often, the information was late or incomplete—frequently, both.”

“What did you do?”

“I talked with my boss, the employee, and the employee’s boss.  (I also complained to my spouse, in-laws and kids.)  All were supportive and the employee agreed to do better and did—but improvement was short-lived.”

“OK, what did you do next?”

“I heard a lecture on the value of professional nagging.  So I began sending the employee frequent, reminder texts and voice messages. Occasionally, I just dropped by to visit.  I was always pleasant and offered to help.  The employee has become much more responsive, and I think we actually get along better.”

Professors Richard Thaler and Cass Sunstein, in their book NUDGE, describe how we can influence others’ behavior by gently reminding them of choices.  Managers at Google use nudges to help their employees eat healthier foods, invest better and improve teamwork.

Nudges are not shoves.  They are not demands.  Nudges high-light choices and may take the form of texts, posters, emails, signs, voice mails, drop-ins, seat-belt dinging and other forms of professional nagging.