If I'm a CEO, I need my employees to draw the same conclusion I do about "what's important." And I want them to behave in a way that reflects that understanding and commitment. Would you agree?
Stewardship of results, however, does not just occur because employees come to understand better what the company's CEO wants to achieve. This is an assumption too many business leaders make. "I have told my employees about my vision and what I expect of them, so why are they not more focused? Why am I not seeing the results I anticipated?" Why indeed? Let's explore the reasons.
Employees invest their talents in helping a business achieve its growth goals because the following factors have been properly aligned in their engagement with that company:
- "I understand the company's goals." This means employees understand all of the implications of that vision and its potential fulfillment in much the same way described above. They understand "what's important."
- "Achievement of the company's goals is important to me." This now turns understanding into importance. Until this occurs, there is no engagement on the part of the employee and, therefore, no ownership mentality develops.
- "I see how I can make a contribution to the goals of the company." At this stage, an employee's passion begins to be unleashed because he sees the relationship between what he understands, why it's important to him and how he can contribute to the targeted outcomes. This occurs when an employee recognizes the unique abilities he has and is given the opportunity to have them not just utilized by the business but magnified.
- "I see the connection between the company's goals and the achievement of my own goals." When this occurs, an employee finds meaning in what he is doing. Because that application of his time, effort and talents is fulfilling ends he wants to achieve, he is willing to commit and engage. The more meaning he finds, the more passion he applies to his work.
Understanding, importance, contribution and connection. When these four things are at work in an employee's mind and heart, there is a different thought process in which he engages as he comes to work each day. His daily decision making and performance are rooted in the answers to these questions:
- "What has to happen?"
- "What can be enhanced?"
- "What might be hindered?"
- "What impact can I have on each of those?"
In other words, an employee that is engaged in this way has developed an ownership mentality; he's become a steward of the results shareholders deem most important.
The question, then, to be considered next is: "How should a company's rewards strategies be engineered to create the link to stewardship just described?"
For an ownership thought process to be cultivated, employees must be able to draw a straight line in their minds between the vision of the company (goals and outcomes), the strategy for its achievement (key performance initiatives and indicators), their role in that strategy (expectations) and how the will be rewarded for achieving those expectations (meaning). When this "line of sight" is achieved, certain passion measures have been met and engagement occurs. An employee then moves from commitment to engagement to accountability - with the latter ultimately becoming self imposed.
These outcomes are not achieved because a company pays a salary, has a group medical plan and allows its employees to contribute to a 401(k) plan. Rather, they are achieved when an employee feels "invested" in the results the company seeks to fulfill. Being invested means the employee recognizes he will be devoting his mind, heart and talent to the business in anticipation of a return on that commitment - and that the return is measurable, attainable and meaningful.
Many of VisionLink's clients have some kind of incentive plan when they engage us to work with them. However, those programs do not typically match the return criteria just mentioned - measurable, attainable and meaningful. In many cases, none of the three criteria are met.
If the incentive is regularly and universally attainable, often it's because it has become an entitlement, in which case it doesn't pass the "ownership" test. For an employee to be invested, he must also be at risk. And he is willing to take that risk if the payoff is measurable, attainable and meaningful.
Incentive plans by their very nature create a direct correlation between performance and results--if constructed right. We believe incentive plans should be "value-sharing" in nature. You share value with those who help create it. Just as a business will not receive a payoff from the market unless it creates sufficient value, an employee participating in an incentive plan should only realize that part of his remuneration if he has helped create value through his performance.
Value-sharing is a systematic way of paying an employee for having met certain performance criteria. That criteria is determined by the role he has in the organization and the key performance initiatives, indicators and factors for which he has stewardship. Incentive payments may be short-term or long-term - again depending on the focus and outcomes needed. They may be made in cash, stock or phantom equity. They may be fixed (e.g. percent of salary) or undetermined (e.g. percent of profits).
In the end, pay and stewardship must become strong partners if employees are going to take ownership of results.