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If there’s anything that will prevent a company from optimizing its bottom line, it is a laissez-faire management style. In other words: a propensity among company managers to avoid too much interference in employee behavior. All employees need leadership, and in addition, employees generally achieve a higher level of performance if they understand what is expected of them and their managers inspect what they expect. Here’s a great question to ask an employee: “What sort of annual raise in pay do you generally expect to receive?” In recent years, the most common answer is 3% to 4%. Now for the second eye-opening question: “What do you believe you would have to do to earn double or triple that amount?” All too often an employee’s answer is: “I don’t have a clue.” When employees don’t know what is expected of them or when there are no incentives in place to reward outstanding performance, management is failing to take advantage of one of the most basic of management principles to hold employees accountable for measurable results and reward outstanding performance. A bonus schedule is an excellent way to keep workers’ eyes on the measurable results that they have accepted as a performance goal. In the following example, assume that this particular employee’s bonus is tied to his or her ability to achieve a 10% net margin: Goal Annual Bonus
No Limit No Limit
12.0% to 12.9% $9,000
11.0% to 11.9% $7,000
10.0% to 10.9% $5,000
9.0% to 9.9% $3,000
8.0% to 8.8% $1,000
Below 8.0% Zero Another beauty of the bonus schedule is its flexibility. Both the performance goal and the bonus itself can be modified in any way the manager chooses. The goal can be broken down into smaller or larger increments, as can be the bonus itself. A manager might decide to schedule the profit margin in, say, increments of .5% instead of one full percent. Or the bonus could be broken down into smaller amounts of, say, $1,000 increments instead of $2,000. This type of bonus schedule sends a pretty clear message: achieve below 8.0% and your bonus is zero. But by the same token, the sky is the limit. The higher percentage of profit you are able to put on the bottom line, the higher the bonus you will receive. And remember, rewards don’t necessarily have to be all cash. To some employees, especially those who possess relatively low economic values, a day off with pay can sometimes be more motivating than an opportunity to earn a $100 bill.
Managers are not doing employees any favors when they fail to establish measurable standards and hold their people accountable for achieving them. Ask yourself this question: What are the minimum conditions of employment in my company; that is, in addition to showing up for work, what are the minimum performance standards that each of my employees must achieve to keep their job? This is the kind of guidance and direction that will fine-tune your organization and make it run like a well-oiled machine. The best manager I ever worked for received a higher level of performance out of me than I would have ever achieved without his demanding management style. He motivated me to a higher level of accomplishment than I would have ever achieved on my own. At that particular stage of my career, I needed this kind of direction. While I resented his demands then, I tremendously value them today. Avoid using the same management style on each employee. Some employees need a heavy hand and others need a more gentle approach. It has been written that the great Vince Lombardy never chewed out a player unless the player could take it. Lombardy used a less caustic management style on his players who possessed a more passive temperament. Are you a proactive manager? Do you give your people the kick in the pants they need to achieve peak performance? If you aren’t measuring your employees’ performance, odds are that you are not managing them very effectively, either. Take the following action steps to optimize the productivity of the talent on your business team: • Make sure that your employees understand specifically how their performance is measured. • On a monthly basis, sit down with each of the people on your team and discuss with them how they are performing against their goals and objectives. Effective managers must inspect what they expect. • When employees are falling short of their goals, brainstorm with them what they might do differently to achieve different results. • Tie your employees’ quarterly or annual bonus to how well they perform against measurable goals. • Turn up the heat on lazy workers or those who are achieving lackluster results. You’re doing your people no favors when you allow them to get away with performance levels below their capability. There’s no place for a laissez-faire management style in a high performance organization. Bill Lee is author of 30 Ways Managers Shoot Themselves in the Foot. http://www.BillLeeOnLine.com |
