Wednesday, December 07, 2005

Eyes on the Prize?

I read a good article on Business Week 'Eyes on the Prize'. The author says that he "instituted a well-designed bonus program in 2004, tying employees' pay directly to their performance and to the company's profitability". This is a fantastic method and in the age of capitalism, it works great.

I have always advocated performance based reward systems. But they are easier said than done. First of all, the organization should have an effective measuring and evaluation system. This cannot always be based on a formula. For number centric or quantifiable target centric organizations, it might be a shade easier but for a global organization it becomes difficult. If awards are a direct function of performance, then performance should be also highly visible and individualistic. So, in this system it is great to award a sales manager who has bagged successful accounts for a target $ sum. But we also need equally effective systems to measure and evaluate the quiet yet effective guy, 'the behind the scene man'.

I have seen this working both ways in organizations. For effective evaluations, there should be 360 degree feedback that includes direct management, peer group, influence groups, operations group and maybe even the support staff. An employee is a part of the organization first and foremost. When there is a wide array of feedback, all facets of the employee comes to the picture and any single function or individual cannot overly influence the judgement. But this evaluation will be somewhat abstract and empherical and cannot be converted to a mathematical formula.

How often has one seen the nice and quiet yet effective guy get great performance reviews? In a 1000+ strong organization? If this indeed happens, this can be a fair indicator that performance based reviews and award systems are indeed working.

The other side of the story is this. Most large organizations have numbers skewed towards the top management not only because they are more valuable to the organizations but also there is a thinking somewhere 'oh, well, I cannot rate this top guy low now. If I do, someone is going to ask me why I didn't I point at his under performance before. I didn't evaluate at all, so I better give him a good rating for performance'.

So, performance and values flow top to bottom and that should be monitored. What gets measured gets done!

No comments: