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Commissions and bonuses should be mechanisms to reward outstanding performance, a certain behavior, and concrete outcomes. They are likely to fail when they become perceived as an entitlement, which means they are no longer considered as a special reward. Eventually, the organization might decide to take away that “entitlement” to reinstate it as a reward – the way it was intended to be – but that’s when employees are likely to react in a very negative way.
I learned this very early on when I had just graduated from University. Almost as soon as I graduated, I bought a small 3 bedroom townhouse, and I rented one of the rooms to a guy I’ll call Joe (this is a fictional name so he won’t try to sue me for defamation). After living with Joe for several months, I got tired of seeing his dirty dishes, clothes on the floor, and I also wanted to encourage him to do his share of the housekeeping.
So I told Joe, “I know that you don’t really care about keeping the house very clean, and since you are paying me for rent, I can’t really force you to clean up after yourself, but I really wish the house was cleaner.” So here was my proposition: “How would $50 off your monthly rent incite you to keep the house clean”. Right away he said “Of course! Great idea!” So we sat down and made a list detailing the responsibilities and schedule for the various housekeeping activities, including day-to-day expectations.
The house was clean for the first month, and I gave Joe 50$ back for that month. Joe wrote me post-dated checks with the new amount for the rest of the year. The only problem is that in the second month, he started to slip some tasks. On the 3rd month, many items on the list were being ignored. On the 4th month, it’s just like if we did not have a list.
On the 4th month I said “Joe, our agreement is obviously not working, please give me the $50 you owe me”. I probably should have said something sooner, but I did not, and this resulted in a big fight. Joe started to look for a new place the next month; not because I kicked him out, but because he was no longer happy.
I learned with this one “employee” and one “reward plan” that it is important to set clear expectations (clean up after himself), offer constant performance feedback, and to make sure it stays clear that the payment (reduced rent) is only something that will take place upon meeting these expectations and performance level. As I discussed before, set clear performance indicators (KPI), and ensure that they are measurable objectives. Following this advice will help keeping employees happy and potentially increase the retention rate.
There are many real-life professional examples of rewards being taken away, particularly now with the economic challenges, causing employees to react. This ranges from Google taking out their “free food” program, to many companies getting rid of their share purchase programs.
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