Today’s organizations are very interconnected. People work in a more agile fashion (though not necessarily in the agile methodology), they lend a hand to other projects and teams, and their managers are less involved in their day-to- day activities.
Edgar Schein, former professor for the MIT Sloan School of Management, once told me that the most valuable cultural asset for any company is the desire of employees to help each other. Therefore, we should be thinking about how we motivate and recognize people who demonstrate this behavior.
The traditional performance process is based on individual achievements. However, research now shows that the highest-performing companies reward people for team goals, not just individual goals. Yet, fewer than one-third of companies do this.
Most performance-management processes are also riddled with other problems. Mercer’s 2019 Global Performance Management Study found that only 2% of leaders believe their performance process delivers high value, only a half have goals at the business-unit level and fewer than 3% believe they have excellent feedback practices. The study also found that only 30% of companies rate managers on their people-leadership capabilities, and only 9% reward managers based on their ability to lead people.
As I learned during my seven years at Deloitte, the success of the organization is based on alignment, continuous feedback, trust and accountability. The Mercer study clearly points out that pay-for-performance is on the rise, and the top driver of success is a sense of fairness and transparency in pay.
I’m seeing performance management again taking center stage, but this time it’s all about sound goal setting, clear expectations, focus, feedback, growth and a fair, equitable and well-designed way of rewarding people. Additionally, the HR-driven employee-performance process must be directly linked to business goals.
What do we do about pay? It’s still very important, but in today’s world, we have to review it more often, adjust it based on market changes, and create total transparency in the process. I recently talked with an executive whose company does quarterly pay reviews for all major roles, and employees receive cost-of-living adjustments at least once per year. Patagonia aligns raises in base pay for an individual’s in-the-job performance and then pays high bonuses for beyond-the-job contributions. Pay is an area with many opportunities to innovate.
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Finally, the research points out that career growth is key to performance and rewards. The best reward for any ambitious person is a promotion. That may not mean a higher-level job, but it does mean a new, exciting, expanded role. Creating a talent network for career growth is key to the future of work.
As you think about your priorities for the year ahead, I strongly advise you to revisit the performance and pay practices in your company. I’m just finishing up a report on the management of technology workers. Our research found that empowerment, clear goals, pay-for-performance and transparency are all key to high performance. In a sense, tech workers are the “canaries in the coal mine,” teaching us what everyone needs to perform better in this new world.
Take a good look at your leadership model in the year ahead, and don’t be in the 91% of companies who don’t reward leaders for the real role they play. Everyone is a leader in the future of work, and it is important in the year ahead that we redefine what leaders do.