Strategic Alignment: Revising Rewards for Results

Legendary management consultant Peter F. Drucker may have pioneered the organizational reward system in the early 1900s with this observation: “If a company is to obtain the needed contributions, it must reward those who make them.” In the early 1970s it became the topic of my doctoral thesis after working with clients where old systems and quotas were kept in place despite new strategies and products.

Steven Kerr’s 1975 article, The Folly of Rewarding A When Hoping for B, in the Academy of Management Journal (volume 18, pps.769-782) explored the prevalence of the disconnect in organizations between what was being rewarded and desired results. Companies were still recognizing individuals based on outdated systems when their strategic planning model had pivoted to respond to changing expectations and requirements.

In the intervening decades since that article was published, surprisingly few organizations have solved this problem by re-aligning their reward systems to fit with their strategic plans. A costly oversight.

Reward and Achievement Disconnects

Outdated metrics still reward individuals for their accomplishments, leading to slow adoption of true team-based paradigms and practices. Team is espouses but not recognized or rewarded.

Honest feedback is another sought after practice which is rarely recognized and frequently a career limiting practice. While an organization touts transparency, at the same time it is not welcomed, supported or praised. Labels such as mavericks and non-team players remain the most frequent outcomes.

One of the clues to any organization is to ask who got promoted last and then ask what did they do to earn the promotion. These simple questions separate organization spin from organizational practice.

Revising Reward Systems

Examining current rewards metrics and practices should be part of any planning process. When reward systems remain stagnant, energy and effort may be sluggish. It is always a good time to ensure that you reward exactly what you want.

Use the following questions to assess your organizations alignment of goals and rewards:

  1. How long does it take to have accomplishment recognition?
  2. Do you measure both individual and team accomplishments with equal emphasis?
  3. Is communication up the chain of command scrubbed to conceal problems?
  4. Do promotion announcements accurately describe the recipient’s achievements? Are promotions based on contributions to current strategies?
  5. Does the strategic planning process include a re-alignment of the reward system?
  6. Are specific outcomes clearly defined and connected to current strategic goals?

Organizational rewards systems age rapidly. And too often they inadequately incentivize initiative, coaching, and insightful analysis. When you continue to reward A, you will get more of that behavior, and if the desired outcome is B, the only thing that will be delivered is futility and frustration. A reward system revision can produce the results you are hoping for.

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