It is a first principle of Change Management that people will act in what they perceive as being their best interests. This principle is simple to grasp but hard to apply because each individual has a different concept of what is in his / her best interests:-
All this to say that as an organisation you need to first be clear what behaviours / performance you wish to encourage, and then find ways to align your employees to these. By and large, you will get what you measure, talk about and reward. However the problem comes when you take for granted certain elements of the behaviour / performance set. For example, the phone directory company The Number (of 118 118 TV commercial fame) allegedly decided that it could maximise its revenues by getting calls completed within 40 seconds. You may feel this seems perfectly reasonable, and so it is but there is an underlying (and unrewarded!) assumption that they do this by providing accurate information. Some bright sparks soon discovered that it was much easier to meet targets if you just fobbed the caller off with any old number, in fact if they had a wrong number they would have to call back!
People will pay attention to what YOU pay attention to. If all you focus on is the result, then they will (rightly) assume that you are not very interested in the means they use to achieve them. If you measure volume, don't be surprised if quality suffers; the same with price v profit. The art of managing a business is to give balanced signals and rewards that ensure that equal attention is paid to everything that is crucial to your business.
Think about it, what would a restaurant be like if the chefs got paid based on their customers rating of their food, or salesmen got rewarded for customer satisfaction as well as sales; what would it be like to deal with that kind of company?
It is essential that your reward system focuses people on a set of behaviours that support both the company's strategy and values. If you need people to show initiative, you have to reward them when they show it. This may not involve any cash, often trust is a much more valuable coin; back their idea and let them learn from it, and reap the glory if it works!
You need a broad, imaginative portfolio of rewards, with multiple options, that enable you to pick the right 'stroke' for each of your 'folk'. These will span the spectrum for informal recognition, through more formal things like employee of the month right up to promotion.
People have a sense of what is the 'norm' in both your company and your industry and their expectations will be benchmarked by these environmental factors. So do not ignore the value of being able to surprise people with something unexpected. It is important not to underestimate the value of a sincere "Thank you", but if your reward is a personal one (such as this) it must be sincere. Take the necessary time to make sure that you really show the fact that you are grateful.
However gratitude is a currency too, and as we accrue 'brownie points' we expect that, over time, these will count towards how we are treated in terms of promotion and pay. You can only hand out so many 'tokens' before people will want to 'cash them in', so don't abuse this system.
There is a complex set of theories about the tension between reward schemes and the power of intrinsic motivation (doing things because they make us feel good). These are certainly worth exploring, but remember even if we are doing an interesting and demanding task that stretches us, unless we feel appreciated for doing this, unless the importance of what we are doing is recognised, we are likely do become demotivated. In the end, you have to show us it is valued rather than just telling us, and in today's world, this usually means in cash or kind!
We will defer pleasure and reward for only so long, then we feel that we are being taken advantage of and we will seek an environment that affirms our sense of worth. As human beings, we have a fundamental need to be valued, and we will always seek out people and places that make us feel this way. Money is just one way we keep score.
So take a while to reflect on those people around you that you depend on, are you making them feel special? Are you rewarding the right things in the right way, or are you running an 'emotional overdraft' with them, in which case, don't be surprised if they foreclose!
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We do not grow absolutely, chronologically. We grow sometimes in one dimension, and not in another; unevenly. We grow partially. We are relative. We are mature in one realm, childish in another. The past, present, and future mingle and pull us backward, forward, or fix us in the present. We are made up of layers, cells, constellations. - Anais Nin