Incentive Pay for Non-Sales Workers

Sales professionals should be and expect to be compensated based on their results. In fact the more confident the sales professional is, the more they'll push for less guaranteed money (base salary) and a higher commission percentage.

But what about the manager, the route technician, the construction superintendent, the factory floor worker or the administrative employee? Do variable pay plans work for them, too? The answer is, sometimes.

I was once a program manager for a large company, assigned to a fixed-fee account in the Florida panhandle that was bleeding money and had high levels of customer dissatisfaction. My task was to cut costs dramatically and improve customer satisfaction simultaneously. Sound like fun?

With the promotion, I became eligible for an incentive bonus. But since no one communicated it to me, I had no idea the bonus plan existed until my regional manager attempted to explain why I wasn't getting it. In six brutal months our team was able to implement significant process improvements, erase the losses, and improve customer satisfaction ratings. But the complex formula that our company used to calculate bonuses couldn't account for the improvement from massive losses to break-even, so I was given a thank-you instead. In this case not only was the bonus plan not motivating (I didn't know about it), but it became significantly demotivating once I found out about it. 

A similar situation frequently exists in the construction industry when job bonuses are calculated on the job's financial performance. The contractor assigns his "A" superintendent to a very difficult job with a very slim margin (and little margin for error) and assigns his "B" superintendent to a relatively straightforward job with a healthy margin. Since the bonus is calculated the same way for each, the "B" superintendent gets the larger bonus. When this gets repeated job after job, the company is, in effect, rewarding mediocrity and punishing excellence.

In order for financial incentives to be effective as a motivator of performance, employees must understand the goals of the incentives, must believe they can impact the outcomes, and they must trust management to do what they say they're going to do. Here's a list of mistakes companies make when developing incentive bonus plans for non-sales people:

1. They don't consider the unintended consequences.  For example, over-incentivizing volume of work can easily result in a drop in quality; and an over-emphasis on individual contributions can easily discourage teamwork and collaboration.
2. They assume all people are motivated by money.  Some people are more motivated by other things, like work-life balance, than they are achieving that bonus. If you want financial incentives to drive higher levels of productivity, you better hire people who are motivated by financial incentives. Utilize a pre-employment assessment that will tell you how important money and achievement are to a candidate.
3. They create entitlements not motivators. Safety bonuses or attendance bonuses, for example, can easily morph into another line on the paycheck that the employee doesn't really think about. It may not really be motivating them to work safely or to show up for work. 
4. There is no feedback. Want to get more bang for your bonus check's buck? Spend a few minutes reviewing with the employee what they did to earn it and how they could get an even bigger bonus next time. Feedback can be just as motivating as a bonus. Owners often overvalue the check and undervalue the feedback.
5. They unintentionally create a compliance issue. If your company pays bonuses or commissions to non-exempt employees for being on-call or for achieving a production goal, there's a good chance you are calculating their overtime pay incorrectly. Your incentive bonus plan might be working, but you might be creating a costly liability if faced with a wage and hour audit.

A well-designed, self-financing incentive bonus or commission plan can indeed provide powerful motivators for your non-sales personnel. Just make sure the incentives are simple to understand, easily calculated, the employee can control the outcome, it's accompanied by feedback and it's compliant.

Quits at a 7-year high. Is it time for an Employee Survey?

Organizations seemed to survey their employees regularly during the 1990s and early 2000s. The war for talent was in full force and they felt it was important to keep their finger on the pulse of their workforce. Then the recession hit. And with it came difficult management decisions - cost-cutting, restructuring and layoffs.

Management in many organizations understandably shifted from a collaborative, participative style prior to the crisis, to a command-and-control style during it. And in many cases the employee survey disappeared with this shift.

Unfortunately, many organizations re-discovered that there is nothing more efficient than a dictatorship, so they have been hesitant or slow to move back to more collaborative cultures. But this statistic might change their minds: 2.8 million Americans voluntarily quit their jobs in March 2015.  According to the Bureau of Labor Statistics, this number has been rising since September 2014, but March marks the first month quits have reached that level since April 2008. 

This means the war for talent is heating up again. Employees feel they have more options than they've had in recent years and many are looking for a healthier, more pleasant work environment. So it may be time to initiate planned organizational changes to make sure your organization is a ship people want to board rather than one from which they can't wait to disembark.

A great way to gauge whether employees may be actively looking for new opportunities, passively open to new opportunities, or happy, engaged and entrenched is to dust off the old employee survey and simply ask them. 

Administering a survey can be easy using an instrument like SurveyMonkey or Zoomerang. However, if you suspect the trust gap between workers and management in your organization has grown from a crack to a gorge over the past few years, you might benefit from engaging an outside organization to conduct the survey for you. Employees are much more likely to provide honest feedback if they trust that their responses are truly confidential. The return-on-investment could be huge, especially if some of those 2.8 million employees who voluntarily quit their jobs were yours.

The hard part comes after you collect the results - demonstrating to your employee base that you are actually listening. This is the phase where you communicate the results along with action plans designed to address their concerns. 

Of course you're always going to have the vocal disgruntled minority who gripe about virtually everything. The challenge is recognizing when it's more than that - especially when it's feedback you don't really want to hear.  A reputable consulting firm can assist not only in the design and the administration of the survey, but in the interpretation of the results, the communication, and the implementation of strategies that evolve from the analysis. 

Indispensable Employees and The Lottery Principle

Employers generally make one of two mistakes when firing someone - they either do it too quickly or too slowly. Too quickly happens when they terminate an employee who might have been salvageable with a little time and good management practices. Instead of spending a little money to rehabilitate, they often decide to spend a lot of money to simply start over.

On the flip side, too slowly sometimes happens when an owner or manager has the illusion that a problem employee is indispensable. This may be rooted in one of three issues:

1. The owner/manager knows that he/she will be inconvenienced by addressing the problem and is willing to tolerate a lot more than they should in order to avoid any conflict.
2. The owner/manager is worried about the problem employee's relationship with a key client. 
3. The owner/manager overvalues the problem employee's individual production, but undervalues how the trouble-maker limits the productivity of the rest of the team.  

I worked with a CEO who needed to make a personnel change in a critical, non-executive role. He requested that I run blind ads, network confidentially, or anything else I could think of to find a replacement before taking action against the poor performing employee. Since I'm not a fan of blind ads in any circumstance, I reminded him of The Lottery Principle. 

The Powerball prize reached an unusually high number one week, which generated some buzz around the office. I asked one of our top sales people if he would be coming into work tomorrow if his numbers were picked. He said, "Yes, but I'll be wearing flip flops!" 

The Lottery Principle teaches us that if an employee wins the lottery tonight and flies to Key West tomorrow, the organization will find a way to work through the unplanned loss, no matter what role the employee filled. If that's true then why do so many organizations feel powerless to act on poor performance, even when they know they need to? 

I found myself in similar situation to that CEO a few years back. I had a poor performer who happened to be loved by my largest client. The frustrating part was that he didn't even do a very good job for the client, but was revered by the client nonetheless. In both my case and in the case of the CEO, above, the problem employee eventually did something that forced our hands. And in both cases we realized that the sky didn't fall and we wish we had acted sooner. In fact, that's the comment you'll most frequently hear from other employees in those cases, "What took you so long?"

So, how do you know when it's time? It's time when you can clearly define what the performance deficiencies are, you have communicated your expectations to the employee such that they know what success looks like, and you've determined that the employee is either unable or unwilling to meet those expectations. At that point it is time severe the relationship and deal with the ramifications, just as you would if the employee won the lottery and disappeared to a Caribbean island.   

Fast Growing Organizations Need an HR Business Partner

You've made strategic investments in your sales and marketing capabilities. They are working and now you're rockin' it! Only problem is, you're putting tremendous pressure on your operations and administrative teams.

This is when you need an HR business partner. Not a compliance guru. Not the "Chicken Little" who tells you you can't do that or you'll get sued. Not someone with an HR title, but whose skillset is administrative not strategic. This is when you need someone affiliated with your organization who understands the dynamics of organizational change.

When you're growing quickly you have the option of hiring experienced people away from competitors. They may bring those competitors' cultures with them. And certain aspects of those cultures may clash with the culture you are trying to build. This may not be that big of a problem when you're growing slowly, but when you add several of these folks at one time, it can impact your culture and frustrate your long-time employees.

Perhaps you have an unwritten policy about not hiring people from certain competitors for that very reason. This can be unwise, too, as there may be some potentially good people working at those companies who dislike those competitors' cultures and work practices as much as you do. An HR business partner can help you assess each candidate on his or her own merits, not on a stereotype that might be attached to them due to where they worked previously. And they can help you design on-boarding processes that increase the likelihood that they'll become accepted into the organization and engaged in their new role.

When you're growing quickly, you're tempted to promote people into supervisory roles who may not be well-suited for those roles. The best individual contributor is not always the best supervisor. Often they're not. This decision made hastily can cause all kinds of problems down the road. How can you know if that individual contributor has what it takes to become a supervisor or manager? How do you determine which skills matter at that next level? That's what HR business partners do - help you assess what you have in the organization and what you need.

When you're growing quickly your basic workflows may become strained. This includes how workers report their hours, their in-process and completed work, request time-off, etc. Those processes may have worked just fine when you were 30% smaller, but now the bottlenecks are starting to appear and details are getting missed. HR business partners who have strong business acumen can help design and roll-out systems that make the entire organization more efficient.  

That's just the beginning. An experienced HR business partner can also:

- design performance feedback instruments so that new hires and long-term employees receive timely and relevant feedback, not just design a new form.

- manage employee communication programs so that employees are receiving relevant information about organizational changes in a timely manner.

- give employees the opportunity to be heard either informally or through employee surveys. And they have the courage to say, "we need to fix this" when employees have a legitimate complaint.

If your organization is not large enough to support a full-time, dedicated HR professional with the business acumen to be a legitimate business partner, consider a fractional solution. You can get all the expertise your bigger competitors have, just when you need it and at a level you can afford.

Did Your Candidate Salt Before Tasting?

A famous executive reportedly used to take prospective new hires out to lunch. If the candidate salted his food before tasting it, the exective wouldn't hire him.

This story has been attributed to Henry Ford, Thomas Edison, Howard Hughes and J.C. Penny among others. It's really an urban legend, but there's an interesting parallel between this story and what I've actually observed from hiring managers.

Some think they have found a similarly clever shortcut. "I won't hire anyone who ever worked for Company X" or "I won't hire anyone who wears loafers to an interview" or "I won't hire someone who won't look me in the eye when answering my questions..."

These witticisms sound clever, especially coming from a person who's confident and believes this method works. But they lack both reliability and validity. Does the type of shoes a person wears to an interview accurately predict how they might perform in the job? I seriously doubt that any scientist would be able to prove a cause-and-effect relationship. And I'm sure, under scrutiny, we'd find that the clever manager isn't as effective at hiring people as he or she thinks.

If I get on my scales each morning and they read 150 pounds (+/-), then the scales are said to be reliable. They provide consistent results. But if I go to my doctor, who has properly calibrated scales which tell me that I weigh 200 pounds, I've discovered that while my scales are reliable, they are not valid. I thought my scales were weighing me in pounds, but they're not. Since I don't know what unit of measure my scales are using (150 what?), they are pretty useless in helping me monitor and control my weight. 

Interviews might also be reliable - we consistently hire people who have strong interviewing skills. But they can also lack validity - good interviewing skills may not be a valid predictor of success in the roles we're hiring for. 

Organizations that consistently make good hiring decisions try to increase the validity and reliability of the inputs in their decision making. Here's what they do:

1. They ask well-designed, open-ended interview questions that offer a peak at how the prospect will behave when faced with challenges similar to what they'll face in this job. 

2. They utilize assessments that have been benchmarked to the job in advance, so they are not using intuition after-the-fact to interpret the assessment results.

3. They look at the candidate's previous work history based on the skills that those jobs required, not on their impression of the organization that they worked for.

Good employees from Company X will likely make good employees for your company, even if you don't respect Company X. Bad employees from the world's most respected companies will likely be bad employees at your place, too.

Certain personality types tend to look up, down or to the side when they are thinking, rather than directly ahead. "Looking someone in the eye" may be a valid criteria when hiring an outside sales person or someone for a role that regularly interacts with the public. The behavioral profile for people who are successful in those roles tends to favor people who naturally behave that way, anyway. But is it a valid input for hiring a call center customer service rep, an accountant or a IT systems analyst?  Doubtful.

So, don't look for clever witticisms like, "did the candidate salt his lunch before tasting it?" to improve your good hire percentage. Build a system that gives you the best chance of hiring a winner based on reliable and valid inputs.

These Kids Today...Managing Millennials

I was recently asked to lead a presentation on the topic of multiple generations in the workplace. I've heard several speakers present on this topic and the punchline is generally something like this:

      - kids today are selfish and lazy

      - baby boomers must adapt their behavior to accommodate them  

I have a slighly different take on the subject. Here are some thoughts:

1. Prevailing beliefs about the differences in the generations are mostly bunk.

No one would ever lead a seminar called, How to Get the Most out of Your ___ Workforce (insert Hispanic, African-American, Asian, Gay, Female or the subgroup of your choice). Most of us recognize that each of those groups is made up of individual human beings and that everyone in a given group doesn't behave the same way nor is motivated by the same things. Yet, many consultants are perfectly happy lumping all millennials or Gen Xers into the same bucket, employing stereotypes based on age that are no more universally true than racial or gender stereotypes are. I'm convinced that they do this simply because stereotyping millennials plays well to audiences of full of boomers. We love to hear, these kids today...." (reinforcing to us that we were so much better...)

2. Kids today are as individually diverse as ever. 

I teach at the university level. I have bright students who study hard and give the discretionary effort necessary to achieve academic excellence as well as students who do the minimum necessary to pass my course. I have extroverts and I have loners. I have mature 19 year-olds and I have immature 23 year-olds. My classmates in the 1980s were very much the same. As were my parents' classmates in the 1950s and my grandparents' in the 1930s.  

3. The "Technology" thing is overblown.

Younger people in the 1920s embraced the automobile and the radio at a faster rate than their parents and grandparents, many of whom preferred to stick with the horse and carriage and were hesitant to bring electricity into their homes. I was the family "tech genius" in 1987 because I could program a VCR when my dad couldn't seem to get the hang of it. 30 years from now articles will be written that the younger generation is better with emerging technology than the aging millennials who prefer to stick with what they know. Always has been true, always will be. That doesn't mean there aren't plenty of older workers who are early adopters and technologically adept.  Assuming a 22 year-old candidate will be a whiz at technology is no different than assuming an Asian candidate will be better at math. It's a stereotype.

4. Experiences differ but motivators don't.

Yes, some millennials may have experienced a different type of parenting than many of us did. We love to talk about helicopter moms, bicycle helmets and how everyone gets a trophy. But when millennials join your organization, they are really looking for the same things that previous generations were looking for. They want interesting, challenging work in an environment that is safe, positive and rewarding. The six primary categories of motivators that determine whether a job is "interesting" to an individual haven't changed and these motivators can be measured in job candidates to ensure a good fit for your organization. Those motivators are:

• Utilitarian - is this individual motivated by money?  
• Individualistic - is this individual motivated by the pursuit of power and influence?
• Theoretical - is this individual motivated by a natural pursuit of knowledge?
• Traditional - is this individual motivated by the desire to maintain unity, order and tradition?
• Aesthetic - is this individual motivated by the pursuit of form, harmony and symmetry?
• Social/Altruistic - is this individual motivated by an inherent love of people and helping others?

Rather than focus on what they need to do to attract and retain millennials based on age-based stereotypes, organizations should focus on simply building a great organizational culture. They should hire people whose motivators align with the position for which they are hiring them and the culture that they wish to reinforce. If an organization is built on trust, mutual respect, managerial credibility, opportunity and fairness, it will attract and retain great workers of all ages.

The Evil Twin Syndrome

It's only been a week since your new hire started and you're already wondering, Is that the same person I interviewed?

I call this the Evil Twin Syndrome. You interviewed the good twin. The one with all the right answers to your interview questions. The one with the engaging smile and the firm handshake. 

But who showed up for work on the first day?  The evil twin. The one who is 20 minutes late. The one who has already asked off for next Friday. The one who doesn't seem to have the skills the good twin claimed to have.

There are a couple of reasons why this happens:

1. Your interview process is designed to determine which candidate makes the best first impression and interviews the best, not which candidate will perform the job the best. The academic way to say it is the interview lacks validity. The practical way to say it is the way questions are asked and answered doesn't accurately predict whether the candidate will actually do well in the role.

The solution to interviewing better is to ask better questions. Sounds pretty simple, but I've sat-in on many interviews with executives and I'm amazed at how poorly some of them prepare for and conduct interviews. Often they are looking at the resume for the first time as they walk into the conference room. One common mistake I see is providing the candidate the answer before they ask they question. Jane, I'm looking for someone who can do X, Y and Z.  Can you do X, Y and Z?  Jane responds, Absolutely!  The next question is, Great, when can you start?  The executive checks the box and moves to another priority. When Jane's evil twin shows up for work, everyone is surprised when she is struggling with Y.  After all, we asked her if she could do it and she said, Yes.

Really good interviewers ask probing, open-ended questions that don't reveal what the interviewer is specifically looking for. Jane, tell me about a time you did X? What were the challenges you faced doing X? Which X-related projects are you most proud of and why? Have you ever been responsible for Y? Tell me about your experience with Y-related challenges?

For some roles, I recommend giving each interviewer a specific assignment and a list of questions. Interviewer number one might only be responsible for determining if Jane has the technical skills needed to perform the job. Interviewer number 2 might only be responsible for determining if Jane's preferences regarding company culture, manager and peer relationships, and communication styles align with the realities of our organization. This is much more effective than having two or three interviewers in a row ask the same questions - Jane, why did you leave your last job?

In my experience, really good interviewers make good selection choices only about 50-60% of the time when they depend on their gut instinct alone. How can they improve on those statistics? That question is answered when we look at the 2nd reason we end up with the evil twin too often:

2. The interview is not supplemented with anything to highlight those potential discrepancies between what the candidate said in the interview and how they might actually behave.

A lot of managers skip the reference check because so many companies today are hesitant to give out any information beyond confirming the candidate actually worked there when they say they did. Even though some calls are non-informative, I still get some that are helpful. LinkedIn is an excellent resource for accessing people in the candidate's network who might offer some insight into how a candidate might fit into your role.

But an even more important method is layering-on one or more pre-employment assessments. The right mix of assessments will show you how the candidate is likely to behave under pressure, what motivates a candidate to give discretionary effort, and what competencies they really bring to the team. To get the most out of an assessment, it should be benchmarked to the job in advance. Some managers use assessments, but review the results without a benchmark and having already decided they want to hire the candidate. They then rationalize-away any results that might suggest the candidate is not an ideal fit. This pattern leads some to lose confidence in assessments altogether. They used the assessment, but they still got the evil twin.

I haven't made an important hire in the past 15 years without considering assessment results. And I can't imagine making an important hiring decision without them! They have definitely improved my good hire percentage and cut down on the number of times I've experienced The Evil Twin Syndrome.