Rethinking Reward and Recognition (Agile HR – Q&A Series Part 3)
This post is part of the Q&A Series: Agile Leadership Webinar «Agile HR | People Operations».
We recently hosted Agile HR expert Fabiola Eyholzer for our Agile Leadership Webinars. In response to the high interest, Eyholzer is answering an aggregation of the great questions we received from participants during the webinar. Click here to watch full webinar
In Part 3, Eyholzer answers your questions about reward and recognition for Agile teams. If you have a question you would like featured in our Q&A series, please submit to firstname.lastname@example.org.
What are the benefits of transparent salary structures?
A transparent salary structure brings many advantages. It fosters trust and enables an open discussion before there is a compensation issue. It also honors the value of an employee — regardless of his/her personal negotiation and lobbying skills. But despite all the advantages, every company needs to evaluate (and test) what degree of transparency is feasible.
What are examples of transparent salary structures?
There are varying grades of transparency. Here are some examples:
· Publish all individual salaries.
· Introduce a salary formula (considering role value, experience, loyalty, and location).
· Publish pay grades for reference roles (e.g., Senior ScrumMaster).
· Provide people with their individual salary band and position within that band (e.g., 85% to the midpoint).
Are individual incentives and MVP awards good for Agile Teams?
Management by objectives (MBO)-based bonuses are toxic for an organization that thrives on collaboration and responsiveness. A fair, transparent incentive system that focuses on enterprise performance (e.g., equity and profit-sharing plans) makes more sense for Agile Teams. That way, employees can financially participate in the overall achievements of the organization.
If we should avoid individual incentives, are team-based incentives OK, or are all incentives bad?
Traditional bonus systems are best eliminated on all levels. But companies who are not willing to remove bonuses should at least remember to:
· Avoid incentives that might provide an undesired motivation for people to stay or interfere with the company’s need to move an employee out quickly.
· Honor value generating and success on an enterprise level, and not individual heroism.
· Move from an “if . . . then” to a “now . . . that” approach.
· Be aware of short-term and/or local optimization.
· Make sure to reward great performance and efforts throughout the year, not just during a specific date or month.
· Celebrate success and talk about success stories.
If individual bonuses are toxic for Agile Teams, what are some suggested ways to reward people?
We are often too focused on bonuses as the only way to incentivize and acknowledge people. But reward and recognition come in various forms: pride in achievement, social contacts and network, new challenges and growth, self-fulfillment.
Each enterprise must find a suitable combination for reward and recognition. This should range from formal recognition on an annual basis to more intimate, personal acknowledgments at a more frequent rate. This may include things like offering on-the-spot recognition, providing a catalogue of gift cards or merchandise, or donating to a charity in the name of the awarded employee or team.
Line managers need a budget they can use for recognition without approval. And the power of recognition must be in everyone’s hands.
Let’s say we enable a bonus system for our teams. How would we do this in Agile way?
There are different approaches. Some teams split the bonus based on seniority level and/or role, while others hand out equal amounts to each team member. Some teams pay out all the money directly, while others hold back a certain portion for a team event.
There are also examples where each person gets to distribute a portion of their team bonus based on how they view the contribution of the other team members. Such an approach may sound intriguing since we empower everyone to make salary decisions. But with great power comes great responsibility, and it can quickly backfire and destroy the team dynamic and spirit. If you want to empower people, give them the power of recognition instead.
Aren’t team bonuses or rewards the equivalent of everyone getting a trophy so no one feels bad?
No, they are not. The “everyone gets a trophy” approach means you get a trophy for showing up, regardless of your delivery. A team award is something different: It is only handed out to the winners. And yes, they are rewarded as a team, regardless of the different levels of individual performance and contribution. That doesn’t matter, because the team wins (or loses) together.
If you encounter individual performance issues, you must deal with them head-on. You cannot and should not rely on an incentive system to take care of that.
How do you promote collaboration over competition between business areas in big companies?
It is simple: Behavior follows compensation. If we focus on team goals, we will have optimizing for team performance even if that comes at the expense of another team. If you want to foster collaboration across the organization, reward good behavior and exceptional efforts of collaboration. At the same time, don’t overlook bad behavior. Reprimand and deal with it fast — before it sets a precedent and becomes demotivating to others. But above all, ensure that your ways of working and sharing knowledge and skills are in sync with a highly collaborative environment and culture.
Why and how do you decouple compensation from performance management?
We all know that the higher the rating, the better the cash incentive. Managers fill out hordes of papers to get the number just right, often tweaking certain categories to the get the desired outcome.
At the same time, we falsely believe there is a guaranteed link between ratings and compensation. But that decision is not purely driven by individual contributions and achievements. The economic situation, corporate climate, and labor markets have just as much to do with it — factors individual managers hardly have control over.
We eliminate employee appraisals completely. And by doing so, we decouple HR instruments from the iterative performance flow.
How do you deal with pay raises in an Agile organization?
Compensation must be easy to deliver — and change. That can only be done by empowering managers to set salaries and pay increases. It must be decoupled from an annual process to allow for a more flexible schedule. Agile leaders are guided by peer reviews, access to adequate data, and expert advice from their compensation team.
If HR/management resists changing their bonus approach, how can teams argue effectively for a change in process?
The industrial-era belief that money is the strongest (and only effective) motivator for employees is firmly rooted in many organizations. Unsurprisingly, compensation and cash bonuses are still used as the predominant way to incentivize and recognize people — an expensive yet ineffective tool.
Ever since Daniel Pink’s [book] Drive (and decades of scientific studies), it is clear: Agile people are driven by mastery, autonomy, and purpose. Understanding the new ways of motivating and honoring people is part of embracing the new talent contract and creating a desirable place of work.
How do you deal with people who are motivated by power and money alone?
The problem is this: Management and HR believe employees are only motivated by money. That’s why they keep pushing money at them, and then they complain that people are all money driven. We change that situation by taking money off the table. Instead of individual bonuses, we offer meaningful recognition, inspiring work, and individual career coaching and growth opportunities. Not all but most people value that more than some incentive.
About Fabiola Eyholzer:
Fabiola Eyholzer (CSPO, SPC 4.0) is an expert and thought leader in Lean/Agile people
operations — the 21st-century HR approach — and CEO of Just Leading Solutions, a New York-based consultancy for Agile HR.
Feel free to connect with Fabiola on Twitter (@FabiolaEyholzer) or LinkedIn (linkedin.com/in/fabiolaeyholzer).