Reward System: Secret To Getting Your People Acting In Your Business Interest.

A reward system really shouldn't be a secret or a mystery. Unfortunately a good method of rewarding performance is a mystery to many people. They moan that they can't get their employees to do the right things, or to do things right. So what do most of them do about it? They continue to moan, and wonder why nothing changes.


Much wiser men than I have ventured informed opinions about reward systems. Warren Buffet, one of the richest men in the world, and the most successful investor in the world notes that when he buys a business, or buys an influential share in one , he wants to influence two things. One of them is executive compensation. His reason for this is that he wants to be sure that executives rewards are for performance directly related to the long term goals of the business.


To improve business results, you need to tie your reward system to actions needed to achieve those results. Part of this is breaking the actions needed for improvement into measurable activities on the part of specific individuals. The role of each individual in achieving the desired results must be clear, and clearly communicated. Each individual must understand his role in the end result. He must also understand how his compensation will relate to his goal related performance.


Many business owners get this far. They embrace the idea of improving performance and using a reward system as a way of getting there. Their approach to measurable activities may even be enthusiastic. They make a concerted effort to cheer lead the launch of the initiative. However, that is almost the limit of their enthusiasm. Don't let this happen to you.


The really hard part for most business owners comes next. Make observation of the necessary performance part of your normal activities. Reinforce the importance of individual employees maintaining their newly assigned efforts. Become the activity leader. Monitor and measure. Monitor individual effort and contribution. Measure results and relate improvement to the assigned activities.


Monitoring and measuring is necessary. Because you will need to go to the next step. And this is where it gets really hard for some people, but not for you. You will work with the measurements that you have made, and the behavior that you have identified through monitoring individual performance. You will use those measurements. You will tie individual compensation in some part to the achievement of assigned goals designed to increase gross profit. And even net profit.


You need to do this in a way that is visible, so that people know that it is happening. It must be fair, and it must be seen to be fair. Resist any temptation to skew the rewards to favor people you like, over people you merely tolerate. In order for your reward system to work well for you, you must be seen to be running a meritocracy. Not a club for the benefit of your closest cronies.


Setting up a reward system to work for you will take some effort. Leading it through its early stages will take effort. However, once people see it work, and experience the results, ongoing maintenance will be less demanding. It will have become part of the culture of your business. And once there it will act much in the manner of a desirable habit. And as you know, many of our habits serve us well. They are just a little difficult to establish.


You may go from Reward System to Management Style , or you may go to

Home Page