No one defends the City bonus culture, but it’d be stupid not to incentivise staff. Roger Beckett extols the Smart guide to rewards
While I haven’t been manning the barricades to save our financial institutions from the crowd baying for bankers’ blood, I do think the bonus culture can be a good thing.
I know it’s not the most popular opinion at the moment, but bonus schemes, commission, reward schemes, targets – call them what you want – can work. People do, on the whole, respond to incentives, and there are some practical guidelines you can follow that will help you set workable reward schemes.
But before we go any further, let me share an anecdote which light-heartedly illustrates my point.
In 2003, the Australian government introduced a ‘baby bond’ scheme, under which it would make a payment to the parent of every baby born from July onwards that year. Was it then a coincidence that the preceding month had one of the lowest birth rates in 2003? No babies at all were born on 30 June, but 1 July saw the highest-ever number of happy events taking place.
But I’m also sure there are stories of how incentivising individuals, teams and even ourselves have backfired, with dire consequences.
Returning to the subject of the downturn, some of you may be asking yourselves ‘How on earth can I offer a bonus when, year on year, we’re behind the eight ball on the number?’.
My advice is think creatively. Some rewards are worth more than money – some of your staff may not even be turned on by financial rewards, but would do back-flips for an extra day or two’s paid holiday.
Understanding your team will help you to reach your goal of devising the right rewards. Talk to them. Explain you are looking at new ways of incentivising them. Engage them. Make it fun. The Dunkirk spirit can work wonders when times are tough. Think of it as a negotiation.
If you’re upgrading your computers, what are you going to do with the old ones? Would someone go that extra mile for a second-hand Mac for their children? As Hilary Clinton said, ‘Never waste a good crisis’, and if there was ever a time to experiment with ideas, it’s now. Goodness knows when the recession will be over, but you can ensure you have a good reward scheme in place for when it does.
However, at some point it’s likely you’re going to have to put your hand in your pocket and incentivise your team with something more substantial, and I think using Smart goals can help match your business objectives with rewards.
The acronym Smart has a number of slightly different variations. It’s a flexible template, and it’s used widely in a variety of workplaces.
• ‘S’ equals specific. Don’t be vague. No one will respond to a moving target. It has to be clear when they pass the winning post and what they have to do to get there.
• ‘M’ equals measurable, meaningful, motivational. What gets measured gets done. Agree dates when you can review progress during the bonus scheme time frame. Sadly, it’s not unusual in some businesses to only discuss bonus results once a year – at the end, when it’s too late to make a difference. And, believe it or not, some people don’t keep track of their performance against targets. It’s in your interest to keep them abreast of their progress to encourage them to reach targets, and, if they’re underperforming, help them understand why.
• ‘A’ equals agreed upon, attainable, achievable. I’m not suggesting you’re strong-arming your team into agreeing on incentive schemes, but employers can be wedded to a particular way of incentivising staff. Be wary of your team just nodding it through because they don’t feel they have the authority to challenge things. Seek meaningful agreement.
• ‘R’ equals realistic, relevant, reasonable. Sense-check your targets – would you go the extra mile for them? Company-wide targets where everyone in the business benefits from the overall performance of the enterprise, such as the scheme in place at John Lewis, can work, but has anyone sat with the receptionist or the accounts team to explain their important role in hitting the agreed performance levels?
• ‘T’ equals time-based. You may be focusing on the year-end, but does that mean everyone else should work to the time frame?
Smart can help you think through goal-setting and create more meaningful bonus schemes. However, such schemes are no substitute for good management. If only the bosses at Royal Bank of Scotland had realised that, we might all be a bit better off.
Roger Beckett is the founder of Msquared
Managing bonus schemes
• If it isn’t working, don’t wait until it’s too late to get it back on the rails
• Don’t begrudge paying out at the end – however much it is
• Don’t be ashamed of communicating the success stories
• Even though you may think that bonuses are a private matter, people do talk, so make sure they’re fair
• Use Smart goal-setting