It’s the time of year when annual reviews and bonuses occur. What are the unintentional consequences of rewarding team members without a framework based on results? In this brief coaching segment, I share three problems that can occur and a framework for assessing performance.
It’s the time of year when annual reviews and bonuses occur. I have a big question for you:
Are you unintentionally rewarding mediocrity and as a result creating future problems?
This happens when people are rewarded with financial compensation or titles and haven’t earned them. This typically occurs because there isn’t a framework in place to show what must be achieved.
We see this most frequently with the current tipping culture. Most service isn’t worthy of 5 stars or 20%. It also occurs in small businesses where owners reward employees indiscriminately. Many of them don’t even realize they’re doing this. Instead, they’re rewarding a team member because they’re generous and it feels good.
Generosity is great, but when it’s misguided it can enable poor behavior. As the owner, you’re responsible for business longevity. Longevity is dependent upon the value created for clients which includes service and the quality of work produced.
When you reward a team member who hasn’t earned it, it creates multiple problems that can snowball.
- Entitlement – the team member starts to believe they’re entitled to rewards versus earning them and take less initiative.
- Envy – peers of team members who’ve witnessed the work of their peer and see the lack of congruity between effort and reward. This is destructive to morale and team culture.
- Mediocrity – it lowers the quality of work produced because rewards aren’t aligned with results. Poor performance will cost you extra money, and time, and drive clients away.
I’m a big advocate for paying people well….when they earn it, by creating or adding value. If someone is only giving minimum effort, then it requires a deeper conversation with the team member to understand if they’re in the right seat.
Here’s a quick way to assess the skills of a team member on a scale of 1-5.
- 5 – Excellent; mastered and able to independently lead others
- 4 – Very Good; understands and contributes to improvement; able to mentor others
- 3 – Good; understands and executes the basic concepts
- 2 – Needs Improvement; additional mentoring needed
- 1 – Needs Training; additional 1:1 training
5’s are rarely given. When a person has earned mostly 5’s in their position, then they’re ready to take on new responsibilities and be promoted, if applicable.
Be transparent with team members when using the scale. Here’s what you earned and why. And here’s what needs to happen to earn a higher score. This empowers them to take ownership of their success because they have clarity on what action to take.
How does this scale translate to financial compensation? Let’s use $100 as an example. If someone scores an average of 5, they receive the full $100. If someone scores an average of 4 (80%), then they receive $80. If someone scores an average of 3 (60%), then you can reward them with $60 at most. Anything less than 3, I don’t reward because the results aren’t there.
What skills and contributions you choose to assess are contingent on your business. The key is consistency in the assessment of skills across team members and then consistency in rewarding them whether financially or with titles.
If you need help creating this performance framework for your business, let’s chat.