It’s been over 20 years since Steven Kerr wrote his classic paper on reward. You would hope that many of the situations he described have improved and yet it seems that isn’t the case. Organisations and society as a whole continue to reward one type of behaviour while expecting or stating that they value something quite different. Kerr’s example of voters saying they want to know how politicians intend to raise money to pay for their policies and then punishing those politicians who speak honestly about where and how they will raise taxes by not voting for them is still true today.
We all know people who work in organisations where the metrics and targets distort behaviour. The problem usually isn’t that the individuals in these organisations are ‘bad’, it’s that the systems used to measure what they do and produce reward the wrong types of behaviours. In order to be seen to be performing, people in such organisations have to ‘game the system’ or do things that they may know don’t feel right but which they are aware will lead to achievement of targets.
Effective leaders know that they must create a culture in which people want to do the right things and are supported accordingly. Poor behaviours are not tolerated in these organisations and the reward system seeks to recognise positive behaviours and penalise negative ones. One of the reasons I like the Leadership Practices Inventory (LPI) is that it looks at 30 key behaviours that research and evidence have shown matter to performance and then establishes how often someone has been seen to exhibit those behaviours. As with any framework it isn’t perfect but it does lead to the start of a sensible and personal conversation about how an individual’s behaviour is affecting others. It also offers an ideal basis from which to start coaching that can lead to important changes, both in the individual and the organisation.
Some organisations take a different approach. In his excellent book “The No Asshole Rule” Robert Sutton highlights a Silicon Valley company who calculated the ‘Total Cost of Assholes’ (TCA) for one of their highest performing but most badly behaved employees. Rather than dismissing him they decided they would deduct the TCA, estimated to be around $160,000 a year, from his year end bonus. This may have imposed a financial penalty on the individual but in my mind it also sent a message that poor behaviour, temper tantrums and general unpleasantness are acceptable as long as you’re productive. Maybe the directors of the company should have returned to basics and looked at their values and decided whether this was the type of person that really should be working with them.
Identifying what you need to measure within your organisation or business and why is important. It’s equally important to think about how individual and team efforts will be recognised and rewarded. Designing effective and fair reward and compensation systems isn’t easy. Deciding at the outset what you would like to reward and how matters a lot. So does the practical implementation. How will you recognise and reward people, with what frequency and how (money is only one of many possible ways to reward). What behaviours is the system likely to encourage, discourage or support? I have seen bonus systems that are structured such that the reward differences between ‘good’ and ‘outstanding’ performance are so small that many people don’t consider the additional effort to be worthwhile. Unsurprisingly they don’t tend to deliver their best and the organisation, its shareholders/stakeholders and customers all suffer as a result. The longer term problems such poorly designed systems cause are also often evidenced in the behaviours arising from a realisation that great performance isn’t recognised or rewarded.
It’s worth bearing in mind Kerr’s closing words: “For an organization to act upon its members, the formal reward system should positively reinforce desired behavior, not constitute an obstacle to be overcome.”
