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?


Anonymous said...

I think it is a blend of the two. The all results orientation can lead to miopia and short-term gain and rewards those who sometimes "happened into" the results. Some level of attention on how the results were achieved or are desired to be achieved needs to be included.

At the same time, all effort and no results doesn't work either.

More disturbing to me is the danger of the mid-level and above managers "driving" their folks so that they (the managers) can (look good) and ensure their own rewards.

I guess it can be done, but I worry about the potential for abuse, and the longer term impact to the business. If feels a little "mean".

Darci said...

Interesting question, Cathy. Things to consider: what if I have a goal that I'm working really hard to achieve, then due to circumstances beyond my control, the goal is replaced by a new goal/priority. i think I would get very demoralized if my target kept moving and I didn't get credit for my efforts.

I'm a big fan of tying performance to results, but in the world of training and development, that's difficult. As a trainer, I can set a goal for having a certain percentage of 10's on my smile sheets and for the number of people I train (butts in seats), but we all know thoses metrics don't matter. However, I don't have control over what happens outside of the classroom. So what results should I get compensated for? I do think that people would take goal setting and performance a lot more seriously in a pay for performance environment.

Perhaps people have a pay range, instead of a salary and everyone start at the midpoint and it can go either way, up or down, based on performance. If you're like me you use this approach when tipping wait staff...they start at 18%...they do an exceptional job, they get more. They forget to fill my water or my entree comes out before my appetizer and they are looking at 15% or less.

I know that was probably more questions, than answers, but that's my 2 cents...unless of course you think it is worth more than that ;)

SywiaG said...

I’m a bit sceptical to paying for effort as it may lead to inappropriate employees’ behaviours in a longer term.

It is all about keeping the right balance between targeting and employees capability to hit the objectives. If targets were SMART enough and external / internal conditions were stable I wouldn’t recommend to pay for not hitting the objectives. Conversely, if objectives were extremely ambitious and external / internal environment were volatile, I don’t see nothing wrong to pay something for performance close (really close!) to target, just to reward an effort people put to reach an objectives. I don’t have any direct answer on your question, Cathy, I’m afraid.

Unknown said...


Thanks for reading and yes, I think it is worth about 5 cents. LOL. Great example about wait staff, but if they know they are getting some percentage no matter what, would they all strive for an exceptional experience?

Sywia, thanks for reading as well. It's a hard question and one that I don't have a quick answer for either..:)

Morten Kamp Andersen said...

Hi Cathy

Great post which made me think. I have posted my own thoughts on this, which is a direct reply to your post. You can find it here.

Btw: love your posts.

Unknown said...

Thanks Morten for reading and keeping the conversation going. I am in your camp, I believe efforts need to be recognized in some way especially with the younger generations as they are used to it. I am very used to the 9 grid methodology. I agree with you some how efforts need to be incorporated. So many times, in support roles effort is great, but reasons out of that employees control, the goal is not met. Then what?

Have a great week-