Management Thought

I am writing this because I promised one of my colleague that I will really write about this subject. Business is very close to my heart and I am critically looking at one aspect of business in this blog post.

Now a days everywhere we have incentives, incentives is major portion of our take home salaries, some companies call it performance pays, some call rewards, some call target achieving bonus but it simply means company is interested to pay you if you give what company wants. It is fair on companies part to give such scheme as there are lot of cost pressures on companies now a days and wage bill can not be same when company performs poorly or when company is in full swing. Many people do not understand the fact that such schemes actually avoids layoffs. Imagine you are a shareholder of company, you want profit to grow every year but market is not growing at this pace, of course company will not be able to perform to the expectation of the shareholders, profits will fall, share price will fall and then so called “rating agencies” will downgrade the company making it harder to do business. Company will analyze and benchmark itself with leader in the industry will find out that employee cost is very high and end result will be lay off. Many will loose jobs in situation like this. But if you have a pay scheme that varies as companies performance then company and employee is safeguarded against such situation.

By reading above many will think I am really working for HR, and I am an under cover person appointed by company but what I wrote till now is of ideal system, but we all know the world is not so Ideal.

The biggest problem is how you will measure the performance. Only profits, Orders, Sales, Turnover are the performance criterion then it is really a short sighted scheme. Everything linked to money, I think one day you coming to office on 7AM or 8AM will also decide your Bonus. Foolish.

Of course company is there to make money and to increase shareholder value but as many thinker and speakers have mentioned that it should not be only target for company. You can make profit of more than 100% by trading in stocks, commodities so should each company start a division to trade, this is not correct so one should really take a look and think what my company is all about. In today’s world when MNCs are becoming more and more big, more complex and having more product than  one can remember, it is important to convey company target to each and every employee. If not then we have a classic department battles and insider fights.

Bonus and incentives play a major encouragement for employees to strive hard to achieve but it is a big problem when things are not going good. This is human mentality that when we achieve everyone things they deserved it but when they fail they think it is unfair to them. So when people fail to get the bonuses they start blaming company, start thinking negative and again under achieve. This cycle is dangerous and for many end of the road is quitting for “better prospects”.

According to me the solution lies in the scheme itself. Targets should be such that when employee over achieves it gives lot of praise and money but also keeps something for future down cycles. Each business is cyclical and hence company really has to plan for downturn. When downturn comes previously accumulated credits of employee can be passed on and company can give some non business soft targets which add value to society and to company. For example research on device which will help blind, or planting trees on deforested areas, adult education, some hobby training courses and many more. This will not only bring positive attitude towards company but also full fill social responsibility “OBLIGATIONS”. I am specially writing in Capital as many companies take this as a cost and not profit.( I wish to write about this in detail some other day) This will help employee to get relieved from stress and day to day struggles and try to get some achievements he can be proud of. This will boost his morale and he will be at his creative best.

So by removing uncertainty of bad times from employees mind, company can expect more creativity and more loyalty from employees. Of course this is again a Ideal proposal, may work or may not work but when I see companies trying crazy things to retain talent this is worth a go.

 

Disclaimer: I should mention this that thoughts mentioned above are not influenced by any company, policy or person. I am not saying current systems are bad and if anyone draws such conclusions then that is his/her though……….

Signing Off