Tuesday, April 10, 2012

Should We Reward Effort?

It's all about pay for performance, right?  In this environment where companies are still watching costs and efficiencies it seems that pay for performance has made a much needed resurgence.  I have had several conversations on performance management in the last few weeks.

Most recently, the topic of rewarding results vs. effort came up.  From a business leaders perspective they are razor focused on results.  In other words, you can make all the effort in the world, but it you don't reach the finish line it doesn't matter.  What about our Millennials and Gen Yers?  I don't think this strategy of rewarding results is very effective.  Remember these are the employees that as children received a trophy for actually showing up to the t-ball game.

In my mind, the equation for performance is relatively simple:

Intrinsic motivators lead to a motivated employee putting forth effort to reach a desired goal.  

Sounds simple but many things can derail the above.  Extrinsic factors like work environment,  pay, and supervisory actions can impact the reaching of goals in a negative or positive way.
So, my question is simple...why not reward effort?  
My next conversation was quite interesting.  I met with colleagues Ed Nangle and Mike Haberman to discuss HR related topics.  We began to discuss the efforts vs. results in performance management.  Ed's perspective was the purest form of performance management I had ever heard.   Ed's philosophy is based on MBO's.  For Director's and above MBO's are agreed upon at the beginning of the year.  The manager is rated and if 95% of goals are obtained then the employee keeps 95% of his/her salary.  WOW! So salary can be taken away depending on how well you achieve goals.  NO AMBIGUITY there.

As I thought about that approach, I thought wow, this type of compensation philosophy is very straightforward and probably by design does not allow for poor performers, as if you don't perform, you make no money.  Ed said that they had used this successfully in companies that the had previously worked with.  He said that line level employees were held accountable by their managers as the line level employee's performance directly impacted their managers checks.

What's your philosophy?  Is effort rewarded or only results?
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