“When people are financially invested, they want a return. When people are emotionally invested, they want to contribute.”
We talk a lot about the 4 Foundations that will give a business owner ‘McFreedom’ – that is, freedom to choose whether to scale, grow, or sell your business…or run it from a beach somewhere.
The 4 Foundations – Planning, Process, People and Performance – are all inter-dependent and inter-related, all essential for making a small successful business even more successful. Without any one of the four, the business can’t fulfil its potential.
The fact is though, that the 4th foundation, performance management, which is the real cornerstone of the whole McFreedom System™ is often the one that is either forgotten or set up badly.
For your Performance Management system to add value, you need three things:
- Ongoing appreciative and constructive feedback
- Formal performance reviews, and
- Reward and Recognition
I’ve talked about the first two in recent blogs, so let’s take a look at number 3, and the common mistakes business owners make.
Or rather, the biggest mistake that business owners make – making rewards all about money, or more specifically, the bonus.
So what’s the problem with bonuses? They’re giving your team members what they want, aren’t they?
Well here’s just a few of the potential pitfalls:
- They are rarely linked to any measure of business performance that the team can impact, and even more rarely linked to any individual performance measures, so they improve little
- They encourage people to focus on the bonus, rather than the Customer – like the train driver who bypassed every station so he could meet his time targets
- They can be divisive; nothing stirs up unrest quicker than a bonus comparison among team members
- They can make you look like you have no clue about what’s going on. Unless you really know how each individual is operating, you can be taken in by a good talker and lose the respect of the team who know the not-so-rosy reality
- Bonuses can become the norm to the degree that they are an expectation rather than an incentive, and cause grief if they aren’t given
To be really effective, a bonus, or better still a pay review, must be based around very clear measures of business performance first and foremost, and then, if the business has done well, very clear measures of the individual’s performance to determine the size of the bonus they will receive.
But money really isn’t everything, there are other much more simple ways to engage your team.
- Develop them – train them both how to do their job well, and how to grow as people
- Show them appreciation – thank them every day for a job well done
- Hold regular ‘formal’ feedback sessions
- Pay them well
- Keep them up to date with how the business is doing
- Listen when they tell you about blocks to them performing well
- Challenge them to achieve goals rather than to work long hours
- Celebrate wins big and small – with cakes or a meal out, or maybe with a visit to an interesting customer
In the words of Simon Sinek, author of ‘Start with Why’:
“When people are financially invested, they want a return. When people are emotionally invested, they want to contribute.”
Do one thing: Consider how you are engaging your team emotionally on a daily basis
