Posted by Jack Vinson on November 05, 2002 at 10:32:24:

In Reply to: Re: Dangers of Rewarding Employees posted by Reilly Atkinson on November 01, 2002 at 18:08:16:

Hello all;

How do companies decide what value their employees add to the company? Is the CEO really worth 100 or 500 or more of the blue collar workers?

I do not have direct experience with rewarding my employees, but the mention of annual incentive (bonus) programs gets me going.

People are employed for their brawn, skill and/or intellect, depending on their position. Those who use their brawn tend to be those who follow procedures and do not have as much opportunity to impact large parts of the business in their routine. If they come up with a great "idea" for an improvement, they probably should be rewarded via the traditional suggestion-box mechanisms (cash, % of additional profits, etc.). Someone who is employed for their intellect that comes up with the same idea is paid to do so, and they shouldn't be in he loop for the reward cash.

By the way, I am not by Boris convinced that these systems are bound to "gaming." It takes several layers of dishonesty for gaming to work properly. If it happens regularly, the company probably has more problems than its reward structure.

It's the end-of-year (or other cycle) incentive that can be used to reward the "intellect" employees. This is where their performance is gauged against expectations and the performance of the business unit / division / company, and the company awards appropriate bonuses. The problem I have seen with this method is that the bonus pool tends to get flattened so much that everyone tends to be rewarded almost equally. This feeds back into the general issue with rating and evaluating employees and the ability to do this "well." GE claim to be doing excellent work in this area.

Part of the problem is that "everyone" knows strict performance measurement does not work well - the star players tend to shine despite their goal/reward structure, rather than because of it. Very rigid structures end up hamstringing management. Loose structures make people feel uncomfortable and lead to greater opportunities for mismanagement and "gaming" of the system.

I know I have made broad generalizations here. Hopefully, honest business leaders make sense of these problems and the nuances inherent in dealing with people.

Jack

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