Imagine that your CEO sent out the following memo to all employees in the company:
Dear Fellow Employee,
As you know we operate in a highly competitive marketplace. Our growth aspirations face many challenges. I believe we have assembled a superb set of talent to overcome those challenges. The key to our success will be how we operate as a team.
Today, I am announcing the elimination of all individual performance bonuses. Each employee’s total bonus target will be the same as before but we will be calculated bonus payout based upon a unified set of company performance factors. Simply put, my bonus performance per cent realization will be the same as yours. Starting today, we are one team. Go Team!
Your CEO
How would you react to this memo?
Is this a fair system?
What behaviors does this system encourage and discourage?
Tuesday, July 1, 2008
In Praise of Team Performance
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1 comment:
Glenn's Take:
I have personal experience with this type of reward system. As a former senior partner in a management consulting firm we maintained this reward system for 15 years. There were no individual performance bonuses. Partners, managers and staff had different bonus targets $, but the realization factor was the same for all. My administrative assistant received the same % of bonus as I did.
That system encouraged excellent teamwork. Even though we had multiple profit centers, we created a culture of collaboration and helping. There were times when we all received high bonuses and when we received nothing. The system tended to put pressure in weeding out non-performers. Individual performance was recognized through promotion and salary. That part of the system created a “grow or out” ethic. Ours was a professional services firm of 600 employees.
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