I’m a great believer that every employee should be able to earn a little treat in their paycheck for going over and beyond the call of duty. In the hotel industry we used to call these “spot bonuses” where management were able to give out small tokens of appreciation (such as gift cards) to employees they’d witnessed going the extra mile for a hotel guest or work colleague.
Sadly, I’ve also seen pay increase mechanisms and matrices so complex that, when incorrectly applied, employees feel tricked out of receiving what they felt they were owed.
One of these is the infamous four boxes, where management is required to place employees in one of four quadrants. The labels change around the globe but they usually read something like this: low competence/low character (bottom left); high competence/low character (top left); low competence/high character (bottom right) and the best box being high competence/high character (top right).
The problem being is the accountants have already dictated that only a certain number of people can be in each box as that defines the bonus awards and merit increases that have been budgeted. The other problem I’ve seen with the four-box approach is the placements can be subjective and qualitative rather than objective and quantitative.
I’ve sat in boardrooms in various parts of the world where senior leaders pontificated on their placings to make it all fit within budget. You see, when there’s too many people in the top right box the bonus budget is blown. My mindset was always: “Well, aren’t we endeavoring to have people perform at their highest level and, if so, why not change the budget if we’re enabling this to be a reality?”
When not done right, annual performance reviews and merit increases can feel more like a trick than a treat.
What I always found sad as a regional finance director was the hours and hours we’d spend deliberating upon annual pay increases and bonuses for dozens of employees we’d supervise, which when added up were often far less collectively than the exorbitant bonus paid out to the one senior leader. I’m no communist but how can one be greater than the sum of many?
On the other hand, I do think we have a duty to ensure that salaries and benefits don’t make people lazy and complacent. If the salary is too heavy and the benefits too rich, I’ve noticed it can slow people down as they get too comfortable and lose their appetite to be innovative and dynamic. Rather than going the extra mile, they sit down and become stuck. Such leaders become maintainers rather than drivers — content to maintain the status quo rather than shake things up to keep the organization fresh and vibrant.
One of the best annual bonus incentive schemes I’ve worked within was where my bonus potential was based on four factors. The first was the overall financial performance of the organization. The second was the financial performance of my specific business unit. The third was an assessment of me by my direct reports, peers and my boss. The fourth was whether I’d actively participated in a voluntary activity to give back to others in a significant manner. This balanced approach made a lot of sense to me.
I was able to indirectly influence the first measure (overall financial performance of the organization). The logic being that, surely, the sum of our individual efforts would benefit the whole? I most certainly had a direct influence on how our business unit performed. It was important to this organization that you worked well with and for others — so the third criteria resonated well. What was interesting about the fourth measure was that the voluntary cause was not dictated to me — I just had to provide evidence of what I’d done and why I chose to do it. That was pretty cool.
If you’re a business owner or senior leader with explicit authority to influence such matters, take a fresh look at your merit increase mechanisms to ensure they’re a treat and not a trick.
If you’re an employee, dust yourself down as we head into a new year and consider how you can go the extra mile to earn that extra something in your paycheck. What can you do to help ensure your organization is ready for the race to come as the economy bursts forth as it indeed will?
Paul Butler is a Santa Clarita resident and a client partner with Newleaf Training and Development of Valencia (newleaftd.com). The views and opinions expressed in this article are those of the author and do not necessarily represent those of The Signal newspaper. For questions or comments, email Butler at [email protected]