RECALIBRATION, NOT REPRIMAND
Steven Cesare, Ph.D.
A generous business owner from Florida called me the other day to talk about his company’s year-end bonus program. Due to his insightful and compassionate approach to leadership, the company has experienced sustained growth and success for many years. In response to that annual growth, the business owner has perennially rewarded all his employees with a festive year-end Christmas party for themselves and their families, publicly-displayed words of sincere gratitude, and a financial bonus to every employee.
Congratulations!
Thanks for being such a capitalistic role model to all of us!
In specific, the business owner has historically treated his successful Department Managers with fulsome year-end bonuses, typically albeit loosely, based on organizational growth. Generally speaking, his Department Managers earn an annual salary between $115,000 – $125,000, supplemented by the industry average bonus payout of 20% of salary. True to form, the owner reflexively plays the annual role of Santa Claus by rewarding his Managers for the unquestioned success they have contributed to the organization.
As is increasingly prevalent, over time, rewards that were initially based on effort routinely become an expectation, ultimately culminating in entitlement. It’s just the way it is; no one is immune from the economic pressure placed on families, which in turn, somehow gets placed onto employers to pick up the slack necessary to support their families’ lifestyles. My discussion with the owner addressed this very topic.
Throughout this recent bonus cycle, his Department Managers began to make “interesting” comments lobbying about the size of their anticipated bonuses to the business owner, even before the company’s year-end results were finalized. Given the increased bonus payouts over the past several years, the Department Managers seem to have now anticipated an even larger percentage bonus for 2024 than that which was received last year.
That’s not good a good omen for the company culture.
During our conversation, the business owner expressed some personal and financial pressure around the thought that he did not want to let his Department Managers down, by not giving them a larger bonus than they received last year. Introspectively, he did not want to be perceived as being cheap, ungrateful, or selfish, by his Department Managers, or even worse, by his own self-perception. Likewise, he did not want his Department Managers to misinterpret a smaller than anticipated annual bonus as somehow being indicative of their inferior performance, his personal dissatisfaction, or an implied reprimand of them.
Stop the hallucinations. Stop the guilt. Stop the self-pity.
I explained to the business owner that accountability is the integral aspect of his company’s results-based team-oriented culture. To that end, I suggested that the owner do what he thinks is fair for his Department Managers for 2024. But then immediately recalibrate the exact performance expectations for each Manager premised on his/her respective departmental performance for 2025, instead of simply benefitting indirectly based on overall organizational success as they have in the past.
When questioned further, I instructed the business owner to review the rolling three-year averages of key performance metrics for each department, by month, then factor in the desired anticipated growth rate for each departmental metric (e.g., revenue, gross margin, employee staffing, customer retention) for each month in 2025, and then share those 12 monthly statements with the Department Managers. Thus, instead of waiting all year for a large discretionary year-end windfall bonus from Santa Claus, the Department Managers would now be solely responsible for achieving a predefined non-discretionary bonus each month.
Start the accountability. Start the tactical planning. Start the coaching.
In this model, the owner can still display his innate generosity to his Department Mangers by increasing the size of their monthly bonus potential, all the while shifting attention onto the elves and away from Santa.
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