Odimbite Odimbite: Praises and Raises – Corporate Language for Rewarding
Adequate and proper reward systems fuel the appetite of employees to go for more. It drives employee engagement and productivity to very high levels. Performance itself must have a basis of measurement. Performance can be based on agreed and clearly communicated targets or defined and communicated objectives.
Thus, performance outcomes arising from these targets or objectives can be poor, below-target, on-target or above-target. This is a categorization based on set performance standards that was set when the targets or objectives were agreed. One major mistake an organization shouldn’t make is to reward all performance outcomes equally but unfortunately this often happens in organizations. On-target performance should be rewarded and above-target performance should be rewarded much more. When on-target performance is rewarded in same way as above-target performance, excellent performance is gradually discouraged. Thus, above-target performance should be rewarded not just marginally compared to on-target performance, but much more to re-enforce positive performance climate.
Challenges in rewarding performance
One challenge though, is how to distinctly delineate on-target and above-target performance. When is performance said to be on-target or above-target? Is it when performance is100% or above? In some performance standards, this is clear to define and in others, it’s blurred. In performance standards of operation, administrative and support functions, this is often a huge challenge determining above-target performance. For instance, a standard that states “hold a stakeholders meeting once every month with minutes and action points sent to attendees and line manager”, would face difficulty defining above-target performance.
However, in some functions, it’s easier to delineate on-target and above-target performance. A performance standard that states “generate sales revenue of USD5M every month” is easier because actual sales of USD5M each month means on-target performance delivery and any revenue above USD5M can be above-target performance. It poses further challenge to say that actual sales revenue of USD5.01M and USD5.8M are above-target performance with equal rewards.
Rewarding both equally can discourage creativity and innovation in the team. The above-target performance can further be categorized into ranges like USD5.01- USD5.5M to be above-target performance whilst USD5.501M- USD6M is exceptional performance. This infers that above-target performance and exceptional performance shouldn’t be rewarded equally or marginally different so as to sustain performance in the future.
Reward models
According to John Maxwell, “Money and recognition are the two most powerful rewards. Almost everybody responds to praises and raises”. Using monetary rewards for top performance can take various forms.
Salary increments
Top performers are given more money according to their performance level. Hence the width of raise between on-target, above-target and exceptional performance should be significantly different. The exceptional performers should see they are really getting more of the pie than all else otherwise, they will be discouraged, slow down or quit, if they feel their reward is unfair. Organizations sometimes make empty promises through what top performers see as inadequate reward for their performance. Managers literally floor their top performers especially when it comes to monetary benefits; their exceptional performers receive less than on-target performers. Exceptional performers should clearly be given more raises that the rest to assure them that their contributions really counted as they say, a bird in hand is worth two in the bush. The reward a top performer gets today is far better to him than the promises of a better tomorrow he cannot vouch for. The proof that the promised tomorrow will be good to him is how much he is given today for what he has contributed. Delayed gratification or reward doesn’t connect top performers to the promised future for long because they get disenchanted if he receives little today like the rest of the staff did, he would begin to think, that when the promised tomorrow arrives, he would still be treated as he faced today!
Salary increments also should be above inflationary trends. Organizations cut corners with raises due to global economic crises or a specific industry situation which is understandable as the business must survive first. In good times, the raise should be generous and make a statement to the entire staff. When an organization gives a 3% raise but inflation is running at 7%, it means the staff is actually earning less than inflation- implying that the purchasing power of the staff is lowered by 4% and invariably the quality of life of the employees has dropped by same margin or more. The staff in similar vein are earning less than they earned the previous year. This could make exceptional employees begin a new search for better opportunity elsewhere because they feel dissatisfied.
Bonuses
It tends to re-enforce top performance when generous bonuses are paid to deserving staff. Some organizations pay out bonuses to selected staff categories from senior managers and above while in others, every staff is paid a bonus depending on organizational performance. Bonuses despite how paid should clearly put more money in the pockets of exceptional performers. Some organizations have a different way of calculating and paying bonuses based on specific achievements that the company is expected to achieve on a divisional or departmental basis. In that case, bonuses are paid as a team based effort as long as the team delivered on bonus targets. This kind of bonus system masks individual contribution as bonus is paid to everyone on the team depending on their level. Other organizations pay out bonuses based on outcome of performance appraisal of staff whilst other organizations pay out bonuses based on organizational performance and percentage of net profits set aside as bonus so each staff gets bonus based on a prescribed minimum and then it’s graduated to higher positions from the lowest in hierarchy. Whatever method is adopted, bonuses should add money to the pockets of employees. It often sends a bad feeling through the employees when an organization focuses on how to evade paying out bonuses. In that case, bonuses payable are decreasing each year despite higher profits made by the organization in each year. Alternatively, organizations pay same bonus each year despite improved yearly performance. These scenarios can really discourage proper staff engagement and exceptional performance.
Recognition
Praise, affirmation and commendation all boost performance. Recognition is helpful in keeping the fuel of good performance burning. Other forms of reward is promotion to a higher position, lateral movements, time off, expense paid holidays, freedom to do the work one likes most, gifts, special trainings, get-together, special project assignments and trips with an executive or the boss for special exposure. Recognition creates a heart of greater commitment especially if the recognition was properly and adequately given. Everyone needs a dose of this from time to time. It is also necessary to clearly delineate who gets what type of recognition for what performance level or hierarchy. This creates equity and social connection in the workplace.
Summary
Appropriate reward is needed to fuel performance. There are several ways to reward performance either with money or with recognition. Any reward offered should be clearly tied to performance level and hierarchy to create equity and social connection. Reward should generously rise with exceptional staff performance to deepen staff commitment. Every employee appetite is fueled to outperform if he is sure there is some extras that will come his way too!
Odimbite Odimbite is Co-Founder, Metrodelight Foods Limited, Nigeria.
