There is an old adage that says “Hire for attitude, you can train for skill,” or something along those lines. However, many companies rarely base their compensation on attitude. It gets based on longevity and skill. I can certainly appreciate that people who have been with you longer should be able to offer more value and therefore, should be paid more. But, I would also argue that it is essential that your compensation strategy has a behavior component. Here are a few things to consider:
1) Does your present plan reward the behaviors you want and need?
When my company was experiencing the economic crisis of 2008, more than ever, I needed our people to be innovative in how they were working, and be willing to adapt to change. Our performance reviews began to focus more on these behaviors than the traditional factors. We started asking new questions. Aside from doing your job, how many new ideas have you submitted or how many continuous improvement groups have you been a part of? Are you negative during meetings or do you focus on problem-solving during times of crisis? Are you willing to change the way you have always done things if the team decides to try something new? These are conversations we began having out of necessity. They also translated to pay. You can be darn sure that during the crisis, we were going to reward those people that helped us most in managing through the mayhem rather than providing roadblocks to innovation.
2) Do you communicate these expectations to your people?
If you have employees that aren’t displaying the right behaviors, do you clearly communicate what needs to change and explain why they may not be getting a raise or bonus? Is there a clear progression that escalates in severity? For example, we usually worked with a three-strike policy. First, there was a heads-up that we needed to see a change. Next, there was a formal warning which went into the employee’s file and resulted in a six-month suspension from any bonuses and increases. And finally, there was an invitation to the employee to be successful somewhere else. We often found that the initial tough conversations resulted in two outcomes: either the employee realized he/she needed to change or he/she thought you were full of it and thus never altered his/her behavior. In both cases, the employees themselves were happier after the resolution. In the case of the former, it often created a tighter bond between the employee, his/her leader, and the overall team.
Do you have a system that rewards employees for the “right stuff”? Do your employees clearly understand what contribution you require? Again, we went through great lengths to verbally reward our people at every opportunity. This would not only make them feel good but allow them to build confidence and grow.
3) Are your company values clearly stated?
I truly believe that “Everything you need to know in life, you learned in Kindergarten.” While most of us don’t need to be reminded to be honest, respectful, positive, and helpful to one’s team, some people do. We often found that our conversations with employees who weren’t performing revolved around this value system. If somebody was constantly negative during meetings or on the shop floor, that was really a form of disrespect to his/her teammates. As sad as it sounds, these values need to be posted as a reminder to everyone: “This is how we do things here.”
4) Are you afraid to pay based on behavior because it is too subjective?
Yes, assessing someone’s behavior is subjective. However, unless your people are paid on piecework or commission, your assessment of their performance is subjective anyway. And if that is your opinion, shouldn’t the employee be entitled to know? At least initially, there should be a two-way discussion. You may learn some valuable information in the process.
As a company, you are well within your rights to expect certain behaviors, especially if those expectations are clearly communicated. I am not suggesting that compensation be based solely on behavior, but it must be a part of the mix. Also, some of the behavioral aspects of an employee’s performance are quanitfiable. The number of improvement ideas an employee submits or the resulting productivity is objective. And even though everything cannot be translated into hard numbers, often it is just as important to reward the effort as it is the actual results. Trust me, I am as much of a results guy as the next business owner, but this approach removed so much inefficiency and waste that our results following the recession were nothing short of astonishing.
The transition from a skills-based compensation plan to one including behavioral aspects was an evolution for my company. In a way, the recession helped create this culture as we no longer had a choice. Survival was on the line. As a company owner and as a leadership team, this approach made life a lot simpler, allowing us to focus on the job at hand, rather than the distractions. We became stonger financially, operationally, and most importantly, culturally.
Andre Kriening is an Advisory Services professional with a background in manufacturing and commercial lending. After selling his business in 2013, Andre founded Strat+ Advisory Services, assisting other business owners with Strategic Focus, Leadership Development, and Operational Excellence.