6. Applaud Effort; Reward Contribution

Nearly every person who comes to work for you wants to contribute in some way; they want to do something worthwhile, something worthy of their talents. But we all know that A-tier, B-tier, and C-tier performers are often playing on the same court. So, it’s crucial that you establish a reward system that is commensurate with the contributions made and expected from team members. The ways that rewards, tangible and intangible, are aligned with the significance and magnitude of results plays a major role in making behavior modeling and behavior modification work for your engaged workplace architecture. You see, if we go back again to Maslow and his hierarchy of human needs, people are looking for recognition for what they accomplish. They are quick to recognize which behaviors/outcomes are rewarded. And, if they have the skills and aptitude, they are quick to adapt to find ways to earn the ego strokes. No secret sauce, no smoke and mirrors.

There is an old story about President Abraham Lincoln’s leadership skill that, whether accurate or myth, lends itself to this “rule” for building an engaged workforce. The situation is said to have happened in the middle years of the American Civil War. (We in the South more commonly refer to it as “The War Between the States,” and some, less diplomatically, as “The War of Northern Aggression.”) It is told that while many of the Union generals gave maximum effort in their pursuit of the war, Ulysses Grant was the most strategically, tactically, and militarily successful of the Union generals. While other Union commanders were both loyal and hard-working, none were producing Grant-like results. However, Grant had a tendency to drink on the job.

Under pressure from the military high command, moralistic politicians, and “do-gooders” to deal with Grant’s “personal issues,” Lincoln made his point by directing one of his aides to learn which brand of liquor was Grant’s drink of choice, and to send a case of it to each of the other generals. Produce results; earn rewards. Reward contribution, not effort!

People have a core need to be recognized, and when an organization recognizes an individual, it acknowledges that this individual and the organization are in sync—that the person is valuable, notable, and worthy. This not only provides immediate fulfillment for a core human need, but it also is essential for initiating and sustaining the cycle of engaging employees.

However, it is important to understand that you can initiate and sustain an engagement environment based on rewarding effort rather than contribution. But if you do so, the incentives for your employees to be “productive” wane, and you cultivate a workforce focused on looking good rather than doing good.

So it comes down to this: Yes, expect genuine effort and hard work, but reward getting something done, and having that something be of value to your mission to build competitive advantage.

In a previous chapter, I talked about demanding contribution instead of effort, and I pointed out the importance of being worthy of extraordinary contribution by valuing it properly. I also pointed out the central role of communicating to employees what role they play in the overall company plan, to the point of introducing them to the customers whose lives they have affected (hopefully in a positive way).

It’s clear to me that it’s of paramount importance to applaud the efforts of employees. At the same time, you need to reserve rewards for real accomplishments that bring about positive outcomes. So, let’s look a little closer at this, because it is a central point to engaging employees.

Let’s consider, for example, a top-level individual contributor, and let’s say you pay him a base salary of $150,000. Now he’s a high wage earner, in the top five percent of the nation for salary. But are you paying that salary for his effort? My guess is that it’s assumed he will give extraordinary effort—you are paying for the results. But how do you structure the reward system so you applaud his effort but reward his contribution? Candidly the “applause,” per se, for his efforts is inherent in the fact that you employ him, that he has a key role in the strategic plan of the organization, and that his salary reflects all of that. So, the salary is there in recognition of potential, aptitude, and the expectation of results, of contribution. To show how to structure a reward system for him and people throughout your company, let’s look at a sports analogy.

Think about major league baseball. Take a first-year player. Not a superstar but a promising prospect. He signs a contract for a six-figure salary so the team can lock him up, observe him, and see how he contributes. He becomes a part of the regular lineup.

Okay, let’s say at the end of the year he has produced a batting average of .230, with 40 RBIs, and 3 HRs. (For those of you who are not baseball fans, this is slightly below average. An average batter contributes one out of every four times he is at bat.) Let’s say further he has committed 15 errors, and his on-base percentage was less than 25 percent, or .250. (That’s bad performance.) But he plays hard. He runs out every hit, his uniform is filthy because he’s not afraid of the hard slide, and he’s always cheering his teammates on—a great clubhouse influence, as they say. At the end of the year, he says he really believes he has earned a raise because he has worked so hard.

You are the general manager. What is your response? The correct response should be that the management applauds the effort but can’t reward him because his production was low. To keep him interested, he might get some small cost-of-living adjustment, and A-for-effort. But it would be irresponsible and possibly damaging to the rest of the team, to the real contributors, if he were rewarded disproportionately to the numbers he really put up that year.

So, an employee can be a B player and be paid a just salary to “put up okay numbers—batting .230,” working hard every day to get the job done efficiently, and still be of value. He’s worth his pay if he gets the job done in time, without error, and elevates the team with his spirit. He’s got a role. He plays it very well, even though he’ll never be top dog.

That said, it’s just as important to recognize that there are people in an organization for whom there are lower expectations. After all, it’s unrealistic to expect everyone in the organization to be a superstar, and these types of journeyman players—essential to a team in their own way—shouldn’t be discounted just because they don’t “put up big numbers” every year. However, the rewards given to them should be in accordance with the organization’s expectations and given with the understanding that while not everyone is expected to contribute at the same level, some contribution is required to have a role at all.

When doing so, keep in mind why people work, and what an earlier chapter revealed about work and its role in the “belonging” of all of us, and ask yourself: Why do they choose to work for me? Why do they come back in the morning, again and again, when they really don’t have to, when they have other options? In good work settings, it’s because the organization gives them interesting work to do and because they see or feel that the organization gives them the opportunity to learn and grow. They also like to be around other good people, since the workplace has become the nexus for our social interactions, a place where the employee’s surrogate “family” meets every day. As the “business family” gathers each day, it’s really a parallel family environment.

It is also important for leaders to recognize that sometimes, hopefully not often, companies and executives hire the wrong people. These are employees who are disinterested, or even disruptive—players who don’t fit. Indeed, some employees clearly exert no effort and really are just placeholders. They may bring skill, talent, work history, and a track record to the team, but they don’t want to play. In some cases, they are better than having nobody in the role, but not by much. Leaders must always being looking to “trade up” for that position to get an A or solid B player, but it’s clear that these people should be managed out, and as quickly as possible. By the way, my experience has shown me that: 1) they are recognized early on by their peers and subordinates; 2) they have self awareness; and, 3) management is typically last to identify them.

To underscore a point I made in a previous chapter, let me tell you about when I worked at Liggett Group, Inc., in the late 1970s. At that time, Liggett Group was the parent of Liggett & Myers Tobacco Company. While there, I worked along the same hallway with a guy we’ll call Sal. Everyone who worked in the office marveled at Sal because at the close of every day he would pack two large briefcases full with notes and papers before heading home. No one knew what was really in there, but they were heavy, and Sal—who did not appear to be physically fit—would strain under the effort to lug those over-laden bags out to his car. (The office joke was that he was selling his neighbors reams of paper out of the supply closet.) Yet, in the course of work each day, it was very clear to even the most casual observer that nothing productive was coming from Sal’s desk. There was no positive outcome to the apparent effort. Nothing was actually getting done. I am sure if you asked him if he was a contributor, he would look surprised and say, “Can’t you see all the stuff I am working on? I take work home every night for goodness sakes!” There may have even been a high level of emotional investment from Sal in getting things done; goodness knows he seemed to try. But Sal confused effort with contribution, and he really did nothing to “move the rock up the hill.”

Another thing that was clear about Sal and how he was viewed by the company: No one at Liggett had communicated to him what he was supposed to contribute. No one told him that if he just exerted himself with no outcome, he wasn’t really doing anyone any good. The management at the time may not have recognized the difference themselves, and Sal hung on there, convinced he was moving mountains, where he was more than likely creating roadblocks, and unwittingly so. Sal got small raises and interim promotions, just like everyone else—because at that time, Liggett rewarded effort and never took the time to examine what the effort contributed to in terms of outcome. Who knows, Sal may still be there or at some other large bureaucracy, lugging those overstuffed bags home every night.

Frankly, it’s toxic to reward effort. Why? Well, if you start to reward effort, the people who are making real contributions—and believe me, they know who they are and they know each other—will see their efforts as denigrated. I know that we felt that way at Liggett about Sal. If you are rewarding the churners—the ones who are just putting in the time, packing the briefcase with work to take home each night but never really getting anything done—at the same or a similar level to that which you are rewarding the people who are propelling the organization forward, you are tearing down your company’s will to be productive. The contributors will see that rewards are tied to the wrong metrics and that the company is indeed rewarding motion not results. And since getting results is a big and long-term commitment, the best and brightest will respond to the established reward system, and productivity will stall and backslide. Management will be no more the wiser, either, because they continue to focus on evidence of effort.

Back to the baseball diamond, if you don’t mind. If you reward the .230 hitter with the history of errors and low on-base percentage in any way similarly to the perennial all-star who hits .340, compiles 110 RBIs, and swats 40 home runs, just on the basis of all-out effort, a dirty uniform, and clubhouse camaraderie, what’s the incentive for the all-star to work on his game, keep in shape, and continue to produce at the plate and in the field?

Managing Out the Nonperformers

Not many of us want to return to the days of Dickens and corporal punishment at the workplace (though I have been tempted now and then to welcome it with open arms!), so you have to figure out another way to punish those who are not contributors. Maybe “punish” is too strong a word. Maybe we take this in an end-around way, because there is really no need for punishment. No need for sanctions. If someone isn’t doing his job and isn’t even a third-tier player (meaning he is not only unable to push the rock up the hill but actively dragging it down into the valley), you have to get rid of him. That person must be managed out. This is how it was once at GE under Jack Welsh, when he managed out 10 percent of his workforce each year, while rewarding just the top 20 percent of his performers with stocks and bonuses.

To manage out the nonperformers, you have to create a model for evaluating their contribution, and that model has to be based on that person’s capability—not just on some abstract ideal of performance that is universally and unilaterally applied to everyone in the company. (Remember, we can’t all be quarterbacks.) Once you have established that model and communicated it clearly to the employees, the choice of whether a bad employee stays or goes is really up to them, in the end. They will be able to clearly see where they are not measuring up. With metrics in place, you not only have the chance to cull out the people who are not propelling the organization to competitive advantage, but you have guidelines for hiring replacements whose interests, spirit, and capabilities are in alignment with your organization’s goals. With that new hire, you can focus that employee’s energy on creating a tangible and highly desirable outcome.

So, with an approach like this, you never have to rely on punishing people. Besides, punishing people isn’t a very good use of time and energy, and it usually focuses on revenge, not a sincere effort to motivate a deadbeat employee. If someone isn’t capable of focusing on outcomes, because of lack of skill, personality, or intellect, there’s little you can do with that person anyway, since she is unmanageable. There’s little that can motivate her except the powerful force of withholding recognition and rewards.

I agree that the withholding of recognition and reward is a passive methodology. But there is a universal desire for people to be recognized and rewarded. Yes, even people who exert no effort want recognition and rewards, and if they are not getting it at work, and unable to change their behavior to earn it, it won’t be long before they will go to some other place of work to find it—perhaps to the enduring benefit of your organization.

How to determine rewards? Today’s reward structures are flat, and they should be curved. Here’s why. First, let’s recognize the obvious. Big contributors need big rewards, but keep in mind what I pointed out in an earlier chapter: Not everyone can contribute at the highest level, and rewards have to reflect that. I am not saying that the marketing copywriter should be rewarded for a good slogan at the same rate as the top salesman. But the reward should be something meaningful to that low-level marketing copywriter in terms of the salary he makes. More importantly, when rewarding people in the same job tier and category (or nearly the same tier and category), you have to be careful to make the rewards truly meaningful to your people. Adding to the challenge, you have to use your reward structure as a way of signaling to B players with good potential that they are not yet the top bananas, but were they to be so, you pay bananas very well.

Let’s take an example. In a flat reward system, the top people get healthy bonuses, and the noncontributors get nothing. Unfortunately, the spread between the top tiers of performers may be as flat as to act as a disincentive at bonus time. If I were to say that the top salesperson gets a ten percent bonus for selling $2,000,000 per year, and the guy who sells nothing gets zero bonus, you’d think that was a fair reward system, right?

The top guy has been knocking it out of the park, and if his base is $250,000, he’s getting $25,000. Thing is, there are other sales guys with nearly that same base who are selling just $1,000,000 per year. With a flat bonus structure, they are not getting a five percent bonus, or half what the top guy gets. They may get an eight percent or nine percent bonus, to keep a respectful distance from the bottom. At this rate, the sales guys with good base salaries who are coasting and selling next to nothing would be getting at least a cost-of-living increase and then some each year—for no effort and no contribution.

Now does that ten percent bonus seem fair?

So, under that flat structure, there is little relative reward for being a high-level contributor. To see this clearly, let’s go to a sports metaphor again and compare two players: One plays second base and one play shortstop. They both have just finished their rookie years, where they both made $200,000. The second baseman batted .330, had 35 HRs, 112 RBIs, and a fielding percentage of 950. The shortstop batted .240, had 6 HRs, and 45 RBIs, and fielding percentage of 870. In the baseball world, in the second year, the second baseman—a better player—gets $1,000,000, and the shortstop will again make just $200,000 (or maybe a small amount more) his second year, until he improves his contribution.

With $1,000,000 going to his friend the second baseman, the shortstop has a dramatic example of what is in store for him if he improves in the next season, because the differential in salary and bonus is truly reflective of the two players’ dramatically different levels of contribution.

In the corporate world, you have to take this lesson to heart and provide rewards and recognition that serve as an incentive for everyone to improve and avoid sending a message to your top people that everyone in the organization is “just about equal in the end.”

Finally, another aspect of reward systems to keep in mind is that the workplace is in many ways a familylike social structure. (In another chapter I explain how this has become so, especially in the last 30 years.) Just as in a family, the workplace must applaud effort and reward contribution. As you structure your reward and recognition systems, keep in mind that people like to be around other people who are just like them. And people who are of like minds communicate openly, which you can use to your benefit as a manager. Frankly, this workplace family nexus presents a natural opportunity (a transparent forum, where trusting, like-minded people share ideas and gossip) to see the rewards given for performance and contribution. Given the choice, I know for a fact that coworkers would rather associate with winners than losers. They would rather align their professional fates with winners rather than losers. So, at the workplace, like-minded people, both ambitious and successful, are comingling and learning from each other. When one fellow says, “I hear Johnny’s put up the big numbers this quarter” everyone smiles. He’s on top. But everyone also sees how Johnnie is meaningfully rewarded. And everyone of like mind naturally wants to be like Johnny, to win and reap those same rewards. To your benefit, you as a manager have planted the seeds for a workplace camaraderie that will be the envy of every other manager who seeks to build a high-productivity environment where excellence thrives and naturally propagates itself.