Failure culture and the annual bonus

We are now in the middle of the season where failure cultures engage in devastating acts of self harm known as “Comp(ensation) day”, “Promotion day”, “Bonus day” or just plain “Disappointment” day. This is the day when all the high performing individuals in an organisation become disappointed and start planning their next career move, the under performers give a half hearted “Grrr” to express disappointment, and the failureship make off with most of the companies profits justified by the heart felt belief that they did make a difference this year by saving the organisation from several crises that they created.

In order to maximise the damage to the organisation, everyone in the organisation finds out on the same day that reality is always less satisfying than the expectations set by their own particular avatar of the failureship. This ensures that all of the disappointed high performers in the organisation leave at the same time of year, destabilising the operations and presenting a crisis for the failureship to wallow in. Thankfully the failureship can rely on other organisations in the same declining over (badly) regulated industries to eject their best performers at the same time. The second advantage is that anyone competent leaves before they can gain agency in the organisation and challenge the failureship. Given their divine status, the failureship can move at any time of the year as their accrued bonuses will be bought out by their new employer eager to welcome them after six months spent in the garden.

A risk managed organisation attempts to reduce the power distance index between the layers of the organisation. The challenge is to encourage people to speak up and be transparent about the real situation on the ground (at the Gemba). Nothing increases the power distance index more than letting someone have power to set someone’s pay rise and bonus, often dangling it as a carrot to work harder to hit a deadline. People want to ensure they get their bonus and prefer to use existing approaches that they know “will work” (for them) rather than try new approaches that might work (for the organisation but not them).

One of the most corrosive aspects of bonuses is the way that they undermine collaboration between colleagues. Success is about focus and limiting work in progress. The leadership need to come together in something like the quarterly capacity planning and agree the priorities for the organisation. This is something I have seen with massive positive impact at Skype, Tesco, Prezi and the Baltic Investment Group, where the leadership of the organisation (business, not technology) agree the focus and priorities for new developments. This was only possible because they were not focused on bonuses based on individual goals. At one large investment bank where we tried to introduce capacity planning, the business were not even prepared to go into the room with each other because focusing on the priorities of the organisation would conflict with them achieving their bonus. They can often still get their bonus if they can prove that the failure was due to technology failing to deliver for them.

“Comp day” is the way that the failureship sends a very strong signal of what they really value. Although pay-rises and bonuses tell individuals whether they are valued, the failureship sends the strongest cultural signal with promotions. The reason is simple, pay-rises and bonus are private and do not affect the behaviour of other people. If someone gets a large bonus, they are unlikely to make a big deal out of it because it tells their manager that they exceeded expectations, and they do not want to alienate colleagues. If someone gets a small bonus or even no bonus, they do not want to signal to the rest of the organisation that they are considered a failure. Therefore pay-rises and bonuses do not send directional signals to the rest of the organisation. Promotions and resignations do send very strong signals to the organisation as they show what the failureship really value. Furthermore, the more senior the person, the more significant the signal to the organisation. If you are in an organisation where the leadership are promoting TRBL (The ratatouille of the latest buzzwords, pronounced “Tribble”) you should expect to see advocates and early adopters of TRBL get promotions. If the early adopters of TRBL do not get promoted, leave the company, are made redundant, or turn their back on TRBL then you know that the organisation does not value it. An even stronger signal is when people get promoted for doing the “same old thing”, especially if they are not promoters of TRBL, and even worse if they are detractors or prevent its introduction. Simply put, if the organisation is serious about tribbles, you should expect to see ALL promotions go to advocates and early adopters of tribbles. One or two promotions indicates a token effort. If you have a key players who won’t advocate for tribbles or is a detractor, you can always give them a large bonus but you do not want to signal to the rest of the organisation that they are an exemplar for others to follow.

Bonuses are an example of Skinnerism, a mistaken belief that external (monetary) rewards will motivate people to perform when all they do is motivate people to seek rewards. Herzberg’s “One more time, how do you motivate employees” tells us that salary is a hygiene factor rather than a motivator.

The next post will look at the alternatives?