NZIM – ENGAGING MANAGEMENT : Bounce the bonus richer rewards exist

The marketplace is tight. And in tough economic times, employee morale and money supply take pounding. In times like this, something more than financial bribery is needed to keep organisations performing.
Experience and research both advocate thinking outside the square. Keeping the most talented people in an enterprise focused and positive isn’t just about money. “Bonuses are over-rated,” says Robyn Walshe, an NZIM Northern board member and principal of Davidson Kemp Consultancy.
She concedes, however, that they have been the “currency of appreciation” for some time and are still used as mark of value. “But they let us down when funds are short and there is less in the pool to share around.”
Kevin Gaunt, NZIM Northern chief executive, believes that focusing on money as motivator is “part of the old style management world”. For his money, the key issue in today’s world is “engaging” people. “Motivating is what someone tries to do to someone else. Engaging is what person does themselves,” he says.
Some recent research by global management consultancy McKinsey & Company endorses the NZIM directors’ collective thinking. It suggests that the “economic slump offers business leaders chance to more effectively reward talented employees by emphasising non-financial motivators rather than bonuses”.
The survey found that world wide, companies are cutting back their financial-incentive programmes but, that few of them have used other ways of inspiring talent. “We think they should,” says the consultancy. “Numerous studies have concluded that for people with satisfactory salaries, some non-financial motivators are more effective than extra cash in building long-term employee engagement in most sectors, job functions and business contexts.”
The survey specifically identified three non-cash motivators as “no less or even more effective” than the three highest rating financial incentives – cash bonuses, increased base pay, and stock or stock options. The three non-financial motivators they found effective were:
• Praise from immediate managers.
• Leadership attention (such as one-on-one conversations).
• A chance to lead projects or task forces.
As Walshe points out, research has “been telling us for decades” that financial rewards are limited in their value to motivate. “But,” she adds, “one of the things we did learn over the past year or so is that remuneration packages loaded with bonuses encourage behaviours that may not be good for business – or ethics.
“Customers and shareholders have watched in horror as executives with key roles during periods of significant stuff-ups are still paid sizeable bonuses. Consequently, trust is undermined, reputation is lost, and brand and share values fall.
“The bonus is perhaps becoming another four letter word – never mind that it contains five letters – and may yet become the currency of shame,” she offers.
Gaunt’s emphasis on engagement rather than motivation, is also based on research. The first level of engagement involves asking:
• Am I earning enough money to make me turn up for work?
• Do I have the tools necessary to do my work?
• Do I know what is expected of me?
“At this level,” says Gaunt, “the individual is willing to engage. At the second level person wants to know whether what they do is worthwhile and appreciated. If they find themselves thinking: ‘why on earth do I bother?’ then they are not being recognised and their engagement falls off.
“At the third level, people ask themselves two further questions: am I aligned with where this organisation is going? And: do I like working with these people? If the answer to both questions is yes, then the individual will commit further and become increasingly engaged,” says Gaunt.
“The fourth level of engagement is about the individual looking for growth and opportunity in the organisation. At this stage they are highly engaged but, if they can’t move forward, their engagement will reduce.”
So why haven’t more organisations made more use of cost-effective non-financial motivators at time when cash is harder to find? The McKinsey survey suggests that many executives hesitate to challenge the traditional management wisdom that money is what really counts.
“While executives themselves may be equally influenced by other things, they still think in terms of the size of the compensation,” was one reason provided by respondent to the researchers.
Another, and more probably the real reason for sticking with bonuses, is that non-financial ways of motivating people “require more time and commitment from senior managers” – read leadership laziness.
One HR director McKinsey interviewed talked about senior executives’ tendency to “hide” in their offices – reflecting uncertainty about the current situation and outlook. “This lack of interaction between managers and their people creates highly damaging void that saps employee engagement,” the survey said.
Walshe also adds: “It’s interesting that we’re still focused on bonuses when the messages have been telling us there’s so much more [available to keep individuals motivated and engaged].
“We still use misleading language,” she says. “We talk about motivating others. Some say you can’t motivate anyone. You can help create an environment where it’s easier for individuals to be successful or you can reward them in ways that encourage the behaviours an organisation is after. But real motivation is always something that an individual drives from within.” This, effectively, is Gaunt’s point about emphasising engagement.
Walshe does, however, think some companies are, either voluntarily or because economic circumstances are encouraging them, “tuning in to the power that comes with giving people opportunities to grow and develop” and not just be richer.
One of her clients recently won sales person of the year award which wasn’t “simply stack of money”. It was training. “Once we would have said that top-performing employee didn’t need training and that their performance was evidence they had already arrived,” says Walshe. “But the opportunity to grow, develop and expand their talent and career was considered fabulous prize. That company has changed its currency of appreciation.”
A key attribute identified in the Ministry of Economic Development’s recently released ‘Management Matters’ report is management’s role is to build people capability. It is point with which Gaunt agrees. “Building capability makes organisations more attractive to prospective employees and helps retain the talent already in the organisation. But, I still think too many managers are focused on the operational side of their organisation and not sufficiently on the human resource side.”
The McKinsey study suggests that with profitability returning to the marketplace, there are signs of bonuses making comeback. “While such rewards have an important role to play, business leaders would do well to consider the lessons of the crisis and think broadly about the best ways to engage and inspire people,” they suggest.
“A talent strategy that emphasises the frequent use of the right non-financial motivators would benefit most companies in bleak times and fair. By acting now, they could exit the downturn stronger than they entered it.”