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Feedback and Rewards

5 Reasons Why Rewarding Staff for Performance Fails

Stacey Barr asked:

It’s got to be one of the most stressful aspects to running a small business – fairly rewarding staff for their performance.

The biggest problems with it seem to be:

*  You are rewarding staff for performance that hasn’t added to the bottom line for the business.

*  Staff don’t feel that the performance pay decisions are fair.

*  You feel uncomfortable having performance conversations with staff.

Often these problems occur because businesses haven’t set up the right foundation for performance pay. If you’re thinking about starting to pay staff for performance, or you’re having problems with how you’re doing it already, it’s important to be aware of these five reasons why it can fail:

1.  Performance agreements or job descriptions do not make it clear enough the RESULTS that staff are responsible for (like signing up profitable customers), as opposed to the ACTIONS they take as part of their job (like making sales calls).

2.  There is not enough clarity in the link between the results that staff produce (like signing up profitable customers) and the results the business wants to achieve (like profit).

3.  Measures of performance are not specific and relevant enough to objectively guage actual performance levels (number of sales calls made is easy to measure, but it’s not a good measure of how well staff signed up profitable customers).

4.  Measures of performance are not properly implemented, so little actual data is available as ongoing feedback for staff to improve throughout the year.

5.  And probably the biggest reason, staff feel threatened by the performance management process, very likely because performance is about money or recognition and not about the value of improving the business.

In these five reasons are some pretty strong clues about actions you can take to avoid or reduce the problems most organisations have with their performance appraisal system. So what ideas do you have to improve the way you manage and reward your staff?

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