It is that time of the year, when most of the organizations are conducting their annual performance review and hand out the rewards (promotions, bonuses, share options, etc). Employee promotions play a very important part in the entire cycle. This is how, companies recognize and reward high performers. This is how people move up the ladder in organizations.
Early in the 20th century, most of the labor was physical and repetitive and was individual in nature. It was in this era that rewarding individual performance was a way to improve organizational productivity.
Then came an era where team work started to become an important factor for success. Now, we live in an era where, it is a challenge to even keep up with the pace of change around us. The work is getting more and more intellectual and needs high levels of team work. Still, we are stuck with the rewards policies which reward individual performances.
In today’s environment, rewarding individual performance by promoting your people has become a systemic issue within organizations causing tremendous amounts of stress, reducing organizational productivity and lowering employee satisfaction.
This environment is not conducive for high performers You can only find high performers scattered over the different teams surrounded by average or sub-average performers. It is very rare to find a team comprising mostly of high performers. This is directly as a result of the rewards and recognition.
Recognizing individual performance by promoting your people is not a good idea because:
- Individual Promotions create a culture of individual high performance when organizations are striving to create high performing teams.
- Promotions create organizational bureaucracy. In order to continue to offer promotions, organizational structures are modeled to have multiple layers and with this comes bureaucracy.
- Promotions could even kill organizations. We have known organizations that go bust either because they did not read the market signals or could not change fast enough with the market changes. This could be due to the fact that with so many layers in the middle, the top management sometimes loses touch of reality. Also, this layers of middle management make it really difficult for an organization to change course quickly as each layer of management is trying to protect its own turf.
- Promotions hurt the bottom-line in more ways than we can imagine. They result in increased costs due to a long and complex budgetary cycle. It is known that once a budget has been created and approved, most managers find it imperative to go out and spend the budget (even if they could get by without spending it). This is to ensure that they continue to get the budget for the next year.
- Promotions within a team are not fair to the high performers. I’ve seen this in almost every organization that I’ve worked for. Promotions are announced in each team and usually there are limitations on how many people a manager can promote in a year. So, if you happen to be working in a large team, with a lot of average performers, your chance of getting promotions and better rewards are much higher than if you are in a high performing small teams. This when it has already been proven that smaller teams usually tend to out-perform large teams in all dimensions. So, a high performer in a high performing team is penalized as his manager can’t recognize the performances of all the team members.
So, what should organizations do?
In my opinion, organizations should stop promoting individuals and start promoting teams. Rewards and recognitions should be aligned to team performance only. The best performing teams should get the most rewarded.
Take the analogy of any team sports. Its always the team that wins and not an individual. The team can still pick an individual as its star performer but the rewards and recognition is always for the entire team.The entire team gets promoted instead of an individual.
Recognizing & rewarding high performing teams is a good idea because:
- This will create pressure on all the individuals to pull their weight for team success. If they are not doing their bit and the team suffers, the other members of the team will either fill-in of him or replace him.
- Everyone in the team is only focused on increasing the performance of the team as their reward is linked to the team performing well.
- This will eliminate the need for creating artificial org levels within the organizations there by enabling them to stay lean, which in-turn enables the organization respond to change much faster.
This is a radical approach to rewards and recognition, but one whose time has come.
Whether you like this approach or not, please do let me know by leaving your comments. I would be more than eager to know your thoughts and connect.
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