“On The Folly of Rewarding A, While Hoping for B”, is one of the classic articles regarding workforce management.
The author gives multiple examples that illustrate how leaders communicate with employees but reward different behavior.
Although this article was published more than 40 years ago the message it conveys is still valid today. Financial structures are what reward employees. This is why you see negative corporate behaviors such as administrative bureaucracy, inter-departmental conflicts, and short-term thinking. However, these outcomes often arise from the inability to plan for the impact of reward structures on the lower levels of the organization.
The following are two common sub-optimal financial rewards structures.
Rewarding inner compliance over customer support.
Regularly, people create monetary reward structures that are not designed to make money for customers. Rewards structures that reward customers for their customer service often emphasize the benefits of inner support and under-emphasize customer service.
A document gadget was implemented by a large fitness organization that simplified the process of claiming coverage. However, it significantly increased the amount of time required to enter data.
Doctors were informed when the machine was launched that they could trust the gadget to enter facts in less than 24 hours. Doctors were forced to see less patients daily to meet this requirement. This praise was more about encouraging doctors to provide better first-class care than increasing compliance with internal procedures.
This reward structure is a strong indication that the finance people who created it spend more time with accounting staff who process claims than the doctors who generate sales for the business enterprise.
Sales technology versus price savings: Rewarding price.
Many monetary reward programs are created at the level of business units and then passed down in purposeful silos.
A department of Administrative guides might be given a set number of monetary targets. These targets could be aimed at lowering costs and the income branch may have objectives related to acquiring new business. These objectives are then spread throughout the branches so that staff in Administrative guide are fully rewarded to lower fees, while those who sell character are rewarded for new deals. These employees will likely collaborate within the subject.
Many administrative assistant functions have caused severe income pressure and poor performance. As many as I have seen are extravagant prices that income people rack up in the name of “ultimate deals.”
Rewards structures are often used to create animosity between the interdependent parts of an enterprise.
Sales people don’t care what fees cost, which is true if they’re rewarded for sales. Income human beings can be equally honest and not care about closing sales.
Focus on compliance and not productivity
Memorably, a salesperson said to me that working with the travel support group was similar to getting a license from DMV. They don’t care if I am more productive; they are just as concerned about following the department’s policies.
This is the lesson to learn: If you want different departments working together, then align and create interdependencies between each department’s financial reward structures.
This paper does not aim to diminish the importance of Finance. Its purpose is to raise awareness about how certain financial practices can seriously impact workforce productivity.
The lack of financial understanding by HR departments has been a criticism for many years. However, many Finance departments are not as well-versed in HR.
