Leadership...through the eyes of a coach...Alan Booth

Wednesday, July 8, 2009

THE WRONG MESSAGE WHEN WE GIVE RAISES

This entry is not about money! It is about how we communicate.

I just asked 10 of my clients how often they hold back giving an annual increase and/or bonus to people who are not meeting their manager's expectations and not producing at a higher level to justify an increase.

The answer: increases in salary or bonus are generally held back only when an employee or manager is nearing a termination decision for whatever reason, hoping that this act will motivate voluntary severance.

So we have "trained" people to expect raises when a company's profits grow and even a bonus has become expected.

Worse is the obvious conflict we are causing with these underperforming "B" players is when we do give them an increase in compensation, we are communicating a very clear message that your performance/output is OK.

So the motivation to changing performance does not change and staffing costs increase.

I asked executives what they feel are better options. They reply: [1] replace these people with those who perform better, [2] tolerate their level of performance, [3] reward them less than the previous payout.

What about not giving them an annual increase (especially if they are up to a market level benchmark) and no bonus? Most of my contacts said this would cause more grief than it is worth.
But every single person I have talked to in the past 8 years about this dilemma (118 in one study) 98% admit that they could improve the clarity of measurable expectations for their people...expectations that one could manage to...and compensate according to measurable success!

Why doe this not happen? "We are too busy." So how long does it take to have this dialogue to establish expectations? In my experience, no more than 2 meetings of about 2 hours each maximum per year. Oh! Both the manager and his/her reports should spend some time preparing for these meetings. Add another hour per year.

The result: pay for performance on an individual basis.

So again, why don't we make the time to have the very basic and critical discussion about expectations of our people? Why don't we have a performance management system that impacts performance?

My guess: lack of knowledge of how to do it and changing the leadership culture of manageing to expectations.
 
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