The Most Powerful Key to Motivating Employees
– Delinking performance reviews and raises
Many clients have asked me, “Gary, what is the ONE thing I can do that has the greatest impact on employee productivity?” I have struggled with the answer to that question but, after many years, I’ve settled on this one counter-intuitive step: Delink your performance reviews and pay raises.
What? At first that sounds like it makes no sense. But after I did it in my own company, I saw dramatic and positive results. I am not saying that you should not give reviews and I am not saying that you should stop basing raise decisions on individual performance. All I am saying, is stop doing one review per year and awarding a yearly pay change as a result of that review.
Any manager who has given performance reviews knows how difficult it is for the employee to stay focused on the conversation when all they can think about is their personal bottom line! While you are critiquing their performance, they are wondering to themselves, “How much of a raise am I going to get?” Consequently, very little communication is actually taking place. An important step to take when attempting to re-energize your workforce and improve productivity, is to de-link scheduled pay raises from performance reviews.
A company can start improving its Corporate Culture and begin creating a workforce of motivated self-starters by announcing a change in the review process. Start with informing new hires and all personnel that raises will be given out periodically as merited and that performance reviews will be used solely to discuss each employee’s opportunities for increasing pay in the future. Then pack your reviews with specific details and helpful suggestions for making the employee more productive. Clearly identify what the company is looking for from the employee and give examples. Make it clear that performing at a certain measurable level will result in future pay increases. Coach them, don’t criticize them.
OK, now comes the part where you have to follow through. Part of improving your employee productivity and worker’s attitudes is nurturing and enhancing your own credibility. The employees must trust you and believe that you, as Manager, and the company as a whole, will live up to its part of the bargain and be consistent about it. The promised raises must be given. Your job is to find reasons to do that.
So how do you decide when and how to grant a raise if you are not doling out the pay increases according to a set time schedule. Through massive trial and error in the real world, I have identified a few steps that work quite well:
Step 1: Reward improving performance. When an employee has shown sustained effort over three to six months, bring him or her into the office and tell them that you have noticed the effort and are appreciative, give some specifics and then inform them that you are increasing their pay level by x%.
Step 2: Reward moments of brilliance. When an employee does something that results in gaining important new business, saving significant funds or some other noteworthy event (and overall performance is also acceptable) reward that individual with an immediate bump in pay. Other employees will see that positive ACTION gets immediate results and they will all be looking for their opportunity to do likewise.
Step 3: Track every employee’s raises on a spread sheet. Be sure to review everyone once per year minimum regardless of the fact that you are not operating on a set schedule. Privately, assess each individual at least yearly and if no opportunity has arisen for giving a raise, decide whether this is someone who deserves one based on potential, general effort or steady, modest improvement. Yes, longevity fits in there somewhere too but it can’t be the only determining factor. If you are giving out raises because someone is still around, you will not be improving employee productivity or your Corporate Culture.
Step 4: When you reward employees through Step 3, be sure to help them understand why they are getting the increase. In order to increase the odds of future quality work, be sure to tie the raise clearly to that action that you want them to continue.
As an added benefit to de-linking, Managers will find they no longer have to “manage expectations”. When raises happen periodically and at no set schedule, employees realize that they can more easily affect the size of their own paycheck … at any time. Getting a small raise unexpectedly is a positive experience rather than a once-a-year disappointment because the raise is less than they had hoped. In fact, studies have shown that Variable Interval Reinforcement is the most powerful motivator. That is, reinforcement on no set schedule and of no set size. When your employees understand and believe that every day presents an opportunity for them to get a raise, they bring their A Game to work constantly. To truly have a King Size impact on employee motivation, delink and prosper.
Gary Brose has owned over a dozen businesses in his 30+ years as an entrepreneur. He has identified the 7 Steps to a More Productive Workforce and explained how any business can use them to motivate and inspire their employees. His book, The Ultimate Motivated Employee offers proven steps to help business owners and managers change their corporate culture and enhance productivity. For more information, visit www.smallbizsherpa.com.
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