Organisational Change Management Volume 2

Rewards and Performance

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. Most organisations design complicated executive reward and compensation programs as a way

- to attract staff to their organisation

- to retain staff in the organisation

- to motivate executives to higher levels of performance

. Most programs help to attract and retain staff; but are not as effective in motivating staff. To motivate performance there are 3 key factors

i) money

ii) feedback

iii) social recognition

Although each has a significant impact, when combined they are most powerful in impacting on performance. The last 2 (feedback and social recognition) are linked with human issues, such as

- fairness and accuracy of informal feedback

- a culture that encourages a level of risk-taking and high-performance

- an emphasis on formal performance reviews of the staff member's strengths

- internal communications

- having a manager who is knowledgeable about performance

- the caliber of the executive team, ie quality of leadership and environment created by the senior executive team

It is claimed that these factors can lift performance by up to 25%

. Usually rewards are linked to meeting budgets. The budgeting process has many more negatives than positives. The main negative is the compromise that occurs so that the figures in the budget are more readily achievable. There is a need to separate budget and rewards, and have rewards based on other criteria, ie

"...Compensation for individuals and businesses is not linked to performance against budget. It is linked primarily to performance against the prior year and against the competition, and takes real strategic opportunities and obstacles into account..."

Jack Welch as quoted by Jack Welch et al, 2005

Furthermore, the budgeting process can encourage lying. People will deliberately underestimate what they can achieve. If likely to achieve to the budget estimates, there is a tendency to defer revenue and increase costs so that the negotiations for the next budget estimates are easier.

(sources: Narelle Hooper, 2004a; Jack Welch et al, 2005; Mike Hanley, 2006c)


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