The biggest HR experiment in history
For many years, Dr. Kilian Wawoe worked as a HR manager at ABN-AMRO. Dissatisfied with the bonus culture at the bank, Kilian left the organization and decided to research the effect of bonuses. His conclusion was that bonuses don't increase motivation or encourage better employee performance. And today, during the coronavirus crisis, they have very little effect at all, says Kilian: "I see this crisis as the biggest HR experiment in history." The professor shares his insight and opinions below.
Performance management is changing:
1. Employee performance is unpredictable
During the coronavirus crisis, it is impossible to plan 12 months in advance. Our reality is changing every day. This means that there is little point to setting targets and any plans that you do make must be flexible. My advice? Make sure you have an agile approach to working and focus on the short term. Charles Darwin summed it up perfectly: "It is not the strongest of the species that survives, but rather, that which is most adaptable to change."
2. Employee performance is no longer measurable
Now that targets have little meaning, it is also difficult to measure employee performance. In addition, performance management tells us very little about actual performance: Only 20% is actually based on performance, with the rest being based on perception.
3. The link between performance management and rewards no longer exists
At the moment, there is a significant imbalance in the type of targets that are being achieved — financial targets are not being met, whereas easier-to-achieve targets, for example handling complaints about noise pollution caused by airplanes, are. This means that the direct link between performance management and rewards no longer exists.
4. The remuneration committee has a new member: public opinion
During this crisis, "a deal is a deal" is no longer the most important thing. Perception and emotion are now key. If your organization is receiving financial support from the government, you need to be utterly transparent about this with your customers and explain clearly what you are doing with that money. Accepting financial support from the government while also handing out management bonuses does not go down well with the public.
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How to motivate and reward your staff:
1. Treat performance management and reward systems separately
The classic system of setting targets in January and then handing out bonuses 12 months later is no longer applicable. My advice? Treat performance management and reward system as two separate aspects.
2. Make growth the focus of performance management
Did you know that many people overestimate the motivating effects of money and underestimate the impact of a manager who helps employees to grow? Progression is what motivates employees the most. They want a manager who helps them to grow. Performance management is about growth, in terms of both knowledge and career path. You can help your employees to grow by simply talking to them: How do they see themselves in the future? What training and skills do they need to achieve this? And how can you support them in this?
3. Reward your employees with fixed salary increases and profit sharing
If you have to tell your employees that despite their hard work, the company hasn't made a profit, so you cannot share any profit with them this time, they will understand. Instead, make sure you always choose to reward your employees with salary increases and profit sharing. This is fairest for everyone.
4. Be transparent
Is your organization receiving support from the government? Think very carefully about your expenses. Keep public opinion in mind at all times: If you cannot explain an expense, then don't make it.
Want to find out more about performance management?
Thank you, Kilian, for this interesting webinar! Are you keen to find out more about performance management, crisis management, leadership and being a good employer? Each week, Effectory hosts a free webinar covering a topic that is relevant to the times we now live in.
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