Bonus time just came and went at my company, and once again I got less than I expected, especially considering my performance review. Do I say something to my boss, or accept the fact that companies will always try to give you as little money as possible?
—Name withheld, California.
If there is one topic that unites employees everywhere, it is compensation. Almost no one thinks he’s paid enough.
Interestingly, compensation also unites employers. The vast majority will tell you they pay their people fairly, if not better. Plenty of people like you fall into the gulf between those two viewpoints. They wind up confused, frustrated and even cynical about the whole pay game.
Indeed, there are few issues that do more to disenfranchise employees from management than complaints over compensation. Which is too bad, to put it mildly. Because you simply cannot be a great leader and get great results in today’s marketplace without paying people the right way—with no nonsense and with tons of differentiation.
That does not sound like it’s happening at your company. Why exactly, we can’t tell from your email. But we do know that when people feel underpaid, it’s usually because their bosses deal with compensation all wrong. That is, they are either skinflints or sprinklers.
Skinflints first. These types scrutinize expense reports with Scrooge-like vigilance. They look for the errant umbrella charged to the company or, God forbid, the meal receipt with a dessert. Worse, when it comes to giving out raises and bonuses, skinflints practically writhe in pain. Many are expert in delivering the “it’s been a rough year” speech even in good times.
Unfortunately, these jerks are everywhere and we can only guess what makes these people tick. But from our experience, most seem to have a constitutional paranoia about being taken. Whatever. Their psychosis is deadly for motivation, creativity, productivity and just about everything good in an organization.
Some bosses are sprinklers. They aren’t necessarily cheap, they just give everybody on their teams about the same size raise or bonus—regardless of performance.
Many sprinklers will tell you their approach is fair and promotes teamwork. Indeed, some even use that argument to defend across-the-board pay cuts during tough financial periods.
With very few exceptions, however, such so-called shared sacrifice is just evidence of a manager too weak to make the hard calls. No wonder it’s a practice that invariably drives top performers towards the door.
Other sprinklers aren’t about fairness as much as they are about phoniness. They distribute equal chunks of change, whether the bonus pool is $2 million (about Rs7.9 crore), $200,000 or $20,000. They just can’t bring themselves to tell their employees where they really stand, particularly underperformers. It’s just so much easier.
Some sprinklers will tell you it’s kinder, too. Why not just let everyone think they’re doing OK? Again, this is merely weak management and inevitably sends good people packing.
So how can a boss get compensation right? It’s actually easy.
Step one: Stop the nonsense. Conduct performance appraisals that leave no ambiguity as to where each employee stands.
Step two: Pay accordingly. That means if someone isn’t delivering, don’t give him a little smidgen of a bonus just to keep his nose in joint. Pay him nothing additional. If someone is performing so-so, make him feel it with a so-so sized cheque, and not a dollar more.
But most important, make your compensation system really mean something. Compensate your stars as much as you can. Use money—big money—to make a resounding statement about the payback of delivering superior results. Maybe giving your top employees bigger-than-ever-before cheques won’t come naturally to you at first, especially when it comes in tandem with giving other employees smaller-than-usual ones.
But fight the discomfort. Part of being a truly effective leader is embracing a spirit of financial generosity. Indeed, the act of making your best people feel richer than they ever imagined should excite you as much as it does them. It should thrill you. If not, keep giving until it does.
Look, money talks. Of course, as a manager, you have to create a work environment that is exciting and challenging. But never underestimate the power of cash to deliver results.
When you pay your people the right way, you don’t just get your stars to stay. You build a team that trusts you and wants to win for you. They know you put your money where your mouth is. ©2008/by nyt syndicate
Write to Jack & Suzy
Jack and Suzy are eager to hear about your career dilemmas and challenges at work, and look forward to answering some of your questions in future columns. Jack and Suzy Welch are the authors of the international best-seller, Winning. Campaign readers can email them questions at email@example.com. Please include your name, occupation and city. Only select questions will be answered.