Incentive Packages Part I: Performance Pay History

One of the more complex and complicated topics for business owners resides in motivating employees and ensuring your culture is driving the correct behaviors in the workplace. In a recent conversation, I was reminded that one of the best ways to drive the desired behaviors from those that may not have a vested interest in the organization’s performance is to create a pay-for-performance scenario.  We all know that money is one of the powerful drivers of workplace performance, and companies leverage this motivator in the form of bonus structures and incentive plans that compliment a base salary.  These bonus structures may often be tied to overall company performance and have an element of individual contribution as well.  In this article, we will be looking at the history of performance reviews that are commonly used to determine these bonuses and how they may be applied to the construction industry.        

 

Back To the Beginning

incentive 1An article in the Harvard Business Review traced the origins of performance reviews all the way back to World War I as a means for the US Army to identify and dismiss poor performers.  This started an evolution in ranking individuals, identifying the need to separate accountability from growth in associates, assessing and rewarding performance, and ultimately leading up to where we are today in corporate America. 

Annual reviews are becoming a thing of the past - replaced by an “Agile” methodology of giving feedback on a more frequent basis, but bringing back a numerical rating.  This method allows for a more timely and frequent correction of behaviors, so an associate is no longer performing 10-12 months before being informed that they are doing something incorrectly, or not meeting expectations.  This helps to more readily identify poor performers based on the frequency and magnitude of the corrective instructions.  Potential drawbacks may occur in the form of micro-managing, personality conflicts bubbling up more frequently, and a potential loss of morale if your boss is extremely detail-oriented. 

Read more about the key to an effective Incentive Plan.

       

What To Do?

So, what should the construction industry take from all of this?  That will depend on where your firm is in its own evolution.  If you are one of the giants in the industry, you may benefit by eliminating annual performance reviews in lieu of a system with more frequency – after all it’s a lot easier to steer a giant ship by gradual adjustment than a rapid turn of the wheel. 

If you’re a smaller firm and everyone is wearing a lot of different hats, it may not be possible for you to evaluate your personnel with this type of frequency.  Instead, you may try to focus on the behaviors that have the most significant impact to your business, while also putting a high emphasis on the growth of your people.  A lack of people resources (quantity) means your staff has to be more resourceful, so teach them how to be efficient with their time by focusing on what you see as the biggest opportunities in the roles they perform.  

The nature of the construction industry may not allow for a direct one-to-one correlation with corporate America, but there are many similarities. Because the actions of your people often have a direct impact on the performance of the entire organization, your associates need to be very aware of how their actions may affect the entire company. 

 

Written By Josh Coakley, Senior Consultant at Ascent Consulting.

Read Part II: Performance Pay History

 


 

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