Archive for October, 2009
“You Get What You Pay For”-Rewarding Incorrectly Will Hurt You!
Most organizations will say they reward “results”, yet that is not necessarily true. Organizations establish a formal or informal process to incentivize their workforce to achieve a desired level of performance. Depending on the size and culture of the enterprise, this compensation plan may include all employees, just management or something in between. All such plans establish some target or metric that the company measures in order to determine if the plan’s thresholds are achieved or not. The establishment of these metrics is where the error usually occurs, which truly hurts the overall performance of the company. The metrics will fall into one of three categories; Intentions, Actions and Results.
Intentions-These are deliverables that are planned to be delivered in the future. This is the weakest of all metrics. It is difficult to see how an organization could build a compensation plan around rewarding for nothing more than “hope”. Yet, many corporations reward senior management for just that, “they had great intentions”. We even re-elect politicians based on their “intentions”, and we seem to accept that metric over and over again. I am not sure why? If you want to grow a culture of discontent within your company, reward your management for intentions.
Actions-These are deliverables that are focused on activity. An associate of mine uses the tag line “doing=1/2 done”. One of my favorite sayings is “don’t confuse efforts with results”. Rewarding actions or effort is a way to move initiatives forward, but not a way to get them done. I can see a compensation program that would breakdown a larger project into steps or stages, and reward based on the number of steps completed, but there are very few other examples to support rewarding actions. Rewarding actions will not hold the workforce accountable for the end result, yet there are a large number of organizations that do just that; reward the starting of something, but not the completion of it. Unfortunately, it appears many governments (local, State and Federal) seem to have adopted this method for rewarding their agency officials.
Results-Results are definite deliverables. These are usually dates, dollars, ratios, numbers or other such “objective” measurements. They are tangible events that can be tracked and measured. Compensating your management and workforce based on results will provide a greater level of accountability to your company. Without accountability, the enterprise will aimlessly move forward in a manner much like a sailing ship without a rudder.
Shifting From Accountability to Entitlement-Whose fault is it?
I recently read an article about the shift within corporate America from a workforce that expects to be held accountable, to a workforce that looks for entitlement. Why should we even be concerned with this shift? We should be concerned since a growing level of entitlement within our population is having an impact on the level of productivity found in the United States workforce. In my opinion, there are several reasons for this shift. A few key reasons for the shift to an entitlement attitude are Diluted Leadership, Unionism, Executive Compensation Levels and Government Growth. Let’s explore how these factors are contributing to this severe problem for the corporate America:
Diluted Leadership-Unfortunately I’ve noticed a decline in the level of “Leadership” in the US over the past few decades. Too often, C-Level executives are more concerned about their own careers and compensation than the overall performance of their corporation. Political Correctness continues to be a filter used before decisions are made and actions taken. These diluted leaders are not leading. You don’t find them rolling up their sleeves and taking a position in front of their company, saying “follow me”. No, they are behind closed doors, sending out others to experiment with their plans, and if successful, then they surface to gather the spotlight. I like to call these diluted leaders “empty suits”, and there are many major fortune 1000 companies that have employed these empty suites. True leaders set attainable deliverables and hold everyone accountable to the process of reaching those deliverables, even themselves. They are not afraid of holding themselves and their executive team to the same levels of accountability as they do the rest of the workforce.
Unionism- Although this may not be popular with unions and some union members, I believe that most unions have outlived their original purpose and are not providing constructive benefits to their members. There are certain skilled trade unions that maintain standards and require continuing education to upgrade the skill level of their members, but a vast majority of unions go far beyond that objective. For example, anytime a union recommends a strike to its membership, and goes as far as to whip them into a lather to carry out a strike, I believe it has gone beyond its usefulness to its members, the companies employing their members and the economy. My experience with unions over the years has convinced me that no one wins when a workforce goes on strike. The enterprise loses momentum and both the company and the union members are often unable to recover from the financial losses they incurred, possibly for several years.
Unions can promote an unhealthy level of entitlement within their membership. Ironically, if there was true corporate leadership (not diluted leadership) within more companies, unions would be less popular.
Executive Compensation- Nothing leads to the heightened level of entitlement thinking in a company more than an unreasonable level of executive compensation. A few research studies that I have read state that over 75% of the fortune 500 executives receive over 400x more than the compensation of the average American worker. European and Japanese executives have been reported to receive approximately 130x and 40x their respective average workforce compensation levels. When a workforce sees under-performing executives receive bonuses or exit packages in the $millions, it is difficult for the non-executive workforce to be understanding when the company then claims that they do not have the finances to compensate the average workforce more fairly. The crux of it is that although the general workforce may actually be compensated fairly, because the executive levels were compensated so unreasonably high, a sense of entitlement and discontent grows within all levels of the company.
Government Growth-Governments at all levels, Municipal, State and Federal are growing. One study recently reported that approximately 25% of the total US workforce is employed by government or governmental support organizations in one way or another. Despite good intentions, governmental organizations have never been shining examples of efficiency and effectiveness. A growing number of workers are searching out government positions because the job security and benefits are generally higher than the private sector, often with fewer required work hours-further fueling the entitlement attitude. Less accountability, union protection, lower levels of accountability, political filters applied to performance and a “don’t make waves and you’re safe” culture is a toxic breeding ground for entitlement attitudes.
Personal comments: My fear is that we are slowly following in the footsteps of the European Union. In the book Mind Set! (John Naisbitt), he states that the European Union leaders commited themselves to creating “the most competitive and dynamic knowledge-based economy in the world by 2010″. What have they accomplished since that commitment; Higher taxes and bigger governments, less innovation, slower productivity growth, restrictive labor laws and declining export market share and rising protectionism. Naisbitt further states “Europe is increasingly losing ground in trying to become the world’s economic driver, because it dearly embraces what one of its famous sons, Sigmund Freud, wrote: “It is easier to suffer than to act.” The EU countries all have a strong culture of entitlement which is part of the reason for their anticipated shortfall for 2010.