The Benefits Dilemma

While it’s obvious that employees drive business performance, it’s less clear to many employers why they get the results they do. Our experience in both good and tough economic conditions shows how critically important it is to understand the role that benefits play and maximize their return. Specifically, benefits (including all forms of compensation) can be used strategically to hire, retain, and provide incentives to talented individuals who in turn drive the success of the entire enterprise. The dilemma is how to accomplish all three goals on a budget.

Hire Talent. A down economy is a lot like a clearance sale: it’s usually easy to find and hire talented individuals for less than they’re actually worth. Basic economic theory shows the relationship between supply, demand, and price, so that’s not really a surprise. What is a surprise to many employers is the rate at which talented individuals leave when the economy turns around. Individuals who are hired for less than their actual worth aren’t likely to be very loyal when other opportunities come along. Even worse, it’s tough to change a first impression. Targeted, strategic recruiting can help avoid turnover time bombs and other common hiring pitfalls.

Retain Talent. If employees are a firm’s single greatest resource (and we strongly believe they are), keeping them around longer allows companies to benefit from their skills and experience while mitigating unnecessary turnover costs. But how do firms actually do it? One of the most effective methods is to treat the benefits dilemma as a marketing problem. Focus groups with employees and well-crafted surveys are among the best ways to figure out what employees really want. Firms can then identify which benefits will provide the most “bang-for-the-buck” so everyone wins.

Incentivize Talent. Just having talented, hard-working employees isn’t enough. They also need to be focused on the organization’s goals and have its best interests in mind. An interesting example of proper incentives shown by two Fortune 500 companies with which we have personal experience. One has a very generous sick leave policy, the other does not. In an unexpected twist, however, the firm with the stingier sick leave policy actually hasmore sick employees. The reason is simple but is totally lost on those determining benefits: having fewer sick days means more employees show up to work sick and get their coworkers sick. It’s a vicious, counter-productive, and easily-avoidable incentive, but it still hasn’t been fixed. Properly aligning bonuses with desired results is an even trickier but very worthwhile exercise. Once an organization determines which behaviors it does and does not want, it can then align the incentives to encourage the desired results.

Simple Solution. To be frank: There isn’t one. Every organization has a different culture, different budget constraints, and employees with different needs. That means solving the benefits dilemma may be difficult but will be well worth the effort of hiring, retaining, and providing appropriate incentives for employees. We hope this short post helps create win-win situations for readers and their employees. Our single-minded goal is to help employers improve employee performance. Simply put, that’s Performance Progression.

Performance Progression Expertise
- Targeted Recruiting (hire the right people who will grow with the company)
- Total Compensation Statement (emphasize retention by highlighting non-salary benefits)
- Benefits Review (Identify deficiencies and align rewards to incentivize desired results)

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Dealing With Performance Problems

Do you have an employee who is not performing at the level you expect? Are you afraid that if you address the performance issues, you will end up losing the employee?

Normally, you won’t lose an employee if you address performance problems, but you will lose other employees if you don’t. If an employee is not carrying the load expected from the job, co-workers are forced to pick up the slack. They actually know long before you do that an employee is not meeting expectations, yours and theirs.

Often when an employee’s performance fails to meet expectations, it is because the expectations are not clear to the employee or the employee does not believe that the expectations really matter to you. The first step in resolving the performance discrepancy is to commit your expectations to writing, as clearly, specifically, and measurably as you can.

Next, you should sit down with the employee and deliver your written expectations with any examples or elaboration you may choose to give. You should also explain to the employee why the expected level of performance matters to you and the organization, what the consequences of failure to raise performance to the level of expectation will be, and the time period you are going to give the employee to correct the problem.

Finally, you should explain that accountability for solving the problem rests with the employee and that you would like to meet weekly to discuss progress at a time to be arranged by the employee. If the employee fails to follow through and establish the regular meetings with you, that fact will be added to your list of unmet expectations.

In most cases, the employee will completely understand your performance expectations and will decide to change behavior to avoid the consequences you outlined. If so, you need to follow up periodically to ensure that the performance remains at expected levels.

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Effective Performance Appraisals Focus on Past and Future

The beginning of a new year is always a time to look forward to new opportunities and prospects for increased growth and success. It is also a time to look back, analyze results, and learn from experiences. A well-designed performance appraisal process can look backward and forward at the same time.

Traditional performance appraisal processes are report cards on past performance, written primarily to justify a pay increase. Often they are more glowing than deserved and less than accurate. This deception can come back to haunt the company later, if the employee’s performance falls below standard and needs to be addressed only a few months after receiving a strong appraisal and corresponding pay increase. Such mixed messages confuse the employee, as well as courts and government regulatory agencies the employee may turn to for relief.

Besides lacking open and honest feedback, traditional performance appraisal processes generally miss the opportunity to provide specific coaching and encouragement for employee development in the future. A well-designed appraisal process will not miss that opportunity.

To be most effective, the appraisal should contain a summary of performance in the concluded period (usually six months or a year) and should provide detailed results on specific performance objectives. It may also address competencies or skills demonstrated in the course of producing the results. Some competencies or skills demonstrated will merit praise. Others will need to be developed to positively impact future performance. These are the issues that deserve most of the attention in delivering the appraisal message to the employee.

For the employee to respond most effectively to the development opportunities, the supervisor or manager preparing the appraisal should be specific and complete in identifying the most important growth opportunities. Identified growth opportunities should be limited to one or two. In addition to identifying growth opportunities, the supervisor or manager should offer suggestions of specific activities that will offer the learning or application experience necessary for the employee to develop the identified competency or skill. The person delivering the appraisal can elaborate on these activities orally during the actual appraisal discussion, but they should be summarized on the appraisal document.

In the appraisal discussion, the supervisor or manager should offer support of resources, such as time, money (to pay for seminars, etc.), and personal coaching, and follow through to assure that these resources are available and utilized effectively. With proper supervisory encouragement and follow-up on the development activities, the employee is more likely to take the process seriously and gain the greatest possible value from it.

Performance appraisals and appraisal discussions are excellent opportunities to build relationships with employees and stimulate employees to higher levels of performance in the coming period. Supervisors and managers need a well-designed appraisal process, which addresses both past and future, as the foundation to build upon in continually shaping employee growth and performance.

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Recognizing and Rewarding Performance: The Art of Encouraging Desired Behaviors

People like to be noticed, and they enjoy having their accomplishments and contributions noticed. Having someone, especially someone in a position of authority, notice and compliment one’s performance enhances the individual’s self-esteem and reinforces the desired behavior, ensuring that it will be repeated. Adding a reward, even a minor one, as a future reminder of the accomplishment enhances the positive feeling about the behavior and increases the likelihood that it will be repeated often.

Over a period of time, this process of acknowledging and rewarding desired behaviors is a powerful means of developing the type of performance patterns that strongly contribute to organizational success. The key to recognizing and rewarding performance is for the supervisor or manager to be observant. It is critical that the supervisor spend time wandering around and observing people in the process of performing their jobs. When the supervisor observes an individual doing something special or above the normal expectations, the accomplishment should be recognized on the spot, if appropriate.

In recognizing or acknowledging performance, the key is to be specific. For example, saying something like, “You are doing a good job” has little value. It is not specific enough for the individual to know exactly what made the supervisor happy, and it may be perceived as insincere because it is so general. It is also important to include a brief comment as to why the recognized performance is significant. A specific comment, such as “I noticed that in the past two hours you have exceeded production standards by 10%. Your above standard performance will help us exceed our cost objectives for this shift” will be much more effective in helping the individual understand exactly what the supervisor wants to have repeated and is much more likely to result in the desired pattern of behavior.

A simple “Thank you” associated with a specific comment about desired performance is most often a sufficient reward. However, periodically it may be appropriate to add a small reward to strengthen the feeling of accomplishment for the individual and reinforce the individual’s desire to repeat the performance. These rewards should be simple and relatively inexpensive. It is usually a serious mistake to make them elaborate or expensive and create an expectation of escalating value of rewards. The reward should never be a distraction from the behavior to be recognized or overshadow the message of thanks. The most effective rewards are those that will be frequent reminders of the event being recognized or those that are visible enough to require explanation to others about how they were earned.

One example of a simple reward that is a frequent reminder would be a special key chain. Every time the individual uses the key chain, it will serve as a reminder of the behavior that was recognized and will reinforce the desire to repeat it. Of course, the key chain in this example must be exclusive enough that the recipient values having it and is reminded of the specific event which prompted the reward. If the key chain is commonly available, including available to others who have not performed in special ways, it will not have the desired impact in reinforcing behavior.

An example of a reward that will require an explanation to others is a book of several of movie theater tickets. Most people do not go to movies alone, so the individual is likely to invite friends or family members to go along. The question of where the tickets came from is inevitably going to come up, and the individual will have the opportunity to explain what he accomplished and how it was recognized by a person in a position of authority.

Another example of a reward that requires explanation might be a drinking mug or glass engraved with a reminder of the accomplishment. Any time the individual uses the mug or glass in the company of family or friends, someone is likely to make a comment or ask a question about the engraved message. Again, the individual will have the opportunity to describe the accomplishment and the subsequent recognition and reward.

On occasion, supervisors feel too much pressure to observe and recognize every good deed. There is no need to feel such pressure. In fact, psychological research indicates that intermittent rewards are the most powerful in reinforcing behavior. In other words, recognizing or rewarding every case of positive behavior is counterproductive. Supervisors should look for truly special events for recognition and long patterns of achievement or exceptional accomplishments for rewards. Only when the recognition or reward is exclusive and specific does it most effectively reinforce desired behavior.

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Does Your Employee Handbook Serve The Right Purpose?

No legal requirements exist for you to have an employee handbook. The real purpose of a handbook is to establish the foundation for the relationship between employees and the company. The handbook should set the tone for the relationship and outline mutual expectations. Some legal issues can be addressed in the handbook, but preparing a handbook for legal reasons sets a tone of defensiveness and gives the appearance that the company considers employees to be menaces, which need to be controlled, rather than partners in creating something special.

We recommend that the handbook begin with a welcome and brief explanation of the company’s mission and purpose. We also encourage employers to state the role employees are expected to play in achieving the purpose of the company. Once these issues are outlined carefully, the handbook should address any potential barriers to creating the desired relationship and how those problems will be addressed. In addition, the handbook should explain how common issues are to be handled in the employment relationship.

For example, you could begin by welcoming employees as partners in the company’s crusade to revolutionize the entertainment industry by allowing customers to set their own standards of morality in the entertainment they view. You could go on to state that each employee is critical to that effort because each employee brings his/her own unique set of morals and expectations for entertainment and can therefore identify with the freedom and empowerment that the company’s mission brings to the public. Each employee should be encouraged to exercise initiative and sensitivity in preparing products and in dealing with each customer they encounter. This would be a good place to bring in policies prohibiting discrimination or harassment against customers or fellow employees.

Employees should be reminded of the manner in which they rely on each other, so policies on attendance and communication, if someone will not be at work, should be articulated. Employees should be given the process to resolve issues or have questions answered by talking to the supervisor or HR department. Employees should be reminded that the company understands their need to have a personal life and provides vacation, personal leave (such as FMLA), and other benefits to support them in meeting their personal needs. The company can also acknowledge that employees need to be rewarded for their work and can outline payroll and overtime policies. Any policies on use of company equipment, such as email, internet, etc. could be explained here as well.

While no specific legal requirements exist for content in an employee handbook, good legal reasons exist for including certain policies in the handbook. For example, the Supreme Court has established certain guidelines for successfully defending the company against sexual harassment claims. One of those guidelines is to have a clearly stated and well communicated policy against such behavior and clearly outlined means of reporting such behaviors and seeking redress for them. The best place to state such policies is in the employee handbook. For similar reasons, it is also wise to state the company’s policy against discriminatory and harassing behaviors and that overtime will be compensated but must be approved in advance before worked and costs incurred.

A well written employee handbook will set the tone for a positive employer-employee relationship but will also provide information and set expectations that will protect the company if employees ever engage in behavior inconsistent with law or company policy. The primary purpose should always be building the relationship because that is what 99% of the employees will ever need from the handbook. For the 1% or less who do need to be advised on legal dos and don’ts, common sense dictates that the legal-oriented material be included.

As with any aspect of your business with far-reaching implications, expert advice is valuable, and we stand ready to provide such advice to you.

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‘Tis the Season to Reaffirm Your Policy on Ethics

Only the most naïve among business people still believe that everyone understands the difference between right and wrong and will act accordingly.

In a virtual onslaught of highly publicized court cases, it has become clear that the definitions of “ethics” and “integrity” are not as fixed as once thought. In fact, the only way to be certain that your employees understand ethics and integrity as you would want those terms to be understood is to clearly define the terms and describe the behaviors you expect in compliance with them.

We are not suggesting that all employees are out to take advantage of every situation. We are suggesting that a healthy dialogue on the subjects of integrity and avoiding conflicts of interest will set uniform standards for everyone to recognize and follow.

As the holiday season approaches, you should consider issuing or re-issuing your guidelines for accepting gifts from vendors or others in a position to influence the behavior of your employees. This may be a good time to remind employees that no business decisions should be motivated by interests other than the best interests of the company, customers, and the work team.

Inasmuch as the most notorious cases of abuse of company and employee interests have come from executives of companies, it would be wise for all managers and leaders to ensure that their examples in this area of ethics and integrity are above reproach at all times.

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