Solving problems at the root
As a boutique communications consulting firm in its first decade, this 30-person company experienced success with clients and employees. They were profitable enough to award handsome bonuses. Yet, every year questions and even some complaints arose about this variable element of the compensation plan. Management wanted to understand where the disconnect was, resolve it, and retain their best employees to support the demands of continued growth.
Managers and employees were spending too much time on calibrating expectations and resolving differences after the performance cycle and bonus award were completed. This decreased satisfaction all around and was an inefficient use of time that took energy away from developing the team and growing the business.
The investigations JPCO did through stakeholder interviews revealed that while employee engagement was high, the speed and continuous change that are part of any client services environment meant that poor internal communication was now the norm. We also determined that the performance feedback inputs to the bonus process were not aligned throughout the company.
These findings indicated that any durable solution to the compensation matter would rely on a systems approach that went beyond the bonuses to the root of the problem. Said differently, the complaining around bonuses was the “offspring” of the lack of consistent, clear, and reliable communication both from management and from employees. Further, the “mother” of that problem could be found in the cultural ways that speed and change in the client work was allowed to undermine the employer-implored relationship around compensation and recognition which was otherwise very competitive.
So we worked with the client to improve the performance management process. We also designed corrective measures for how the company talked about the business context, financial performance, and compensation. After the performance management process and internal communications were aligned, we then rolled out a revised bonus structure that worked for the business and gave employees a way to understand in general terms what to expect for bonus.
With the performance review and feedback process tightened up, and communication around compensation based clearly calibrated to employee performance and the business context, we established anchor points in the culture that helped to transmit these new norms and expectations to new employees.
The new performance management process went a long way toward educating employees on what contributions and skills mattered most. As a consequence, staff were highly engaged in the process (a new experience for the firm).
Our bonus design provided some real-time insight and transparency for employees on what they might expect as a bonus based on how the firm was doing through the course of the year. At the same time, the design included a discretionary element that allowed management to recognize contributions that exceeded expectations for any role.
With a stable performance process that engaged staff and managers, the employees had clarity on the inputs to the bonuses determinations. With the context provided by firm-level performance indicators, employees had a way to calibrate their expectations.
The outcome was an elimination of the kind of bonus discussions that had been occurring, and greater engagement and focus on the skills and contributions that matter most to career advancement, to compensation, and to overall business success.