I propose we throw out the current system - really a lack of a system that is based on the underlying priciples of why we have bonus payments in the first place; that is:
- To reward people for their achievements and contribution to company success
- To encourage best performers to not jump ship and to achieve even more next year
- Overall motivation to meet goals and expectations
The probem as I see it is the lack of connecting individual performance to the payout; secondly the discussion to assure achievement as expected might occur throughout the year but not connected to the "motivator" until the announcement of the bonus.
Oops! The latter is not true at all. When I have asked hundreds of managers how their bonus calculation related to what they achieved (or did not), I get the blank stare. Oh! Perhaps if there is any objective connection it is done at the year's end before rewards are finalized.
But if we are to truly retain top people, turn around weak performers and motivate all in achieving great things, why don't we plan and communicate both goals and expectations up front, in the beginning of the year - then keep the $$$ connected to performance updates through out the year? [I know...we can not promise the actual $$$ but the "score" can be tabulated]
Gee! In a good year, there is significant money on the table to just turn into another entitlement program.
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