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Control through Measurements and Punishment

This sounds rather draconian, but most people won't perform unless some system of control is in place that measures progress with resulting rewards and punishments. Traditional schools of thought put the company ahead of everything, and orders coming down from on high to be acted upon by automaton employees with no say in the matter. This is changing to a model in which company goals are met by working through the individual's goals. People will best perform their tasks by figuring out the right thing to do using self-control, and finding the discipline of self-direction. To do this properly, employees need the necessary training, development, information, and resources to be successful. They should have input and buy-in into how the business should be operated. This does not mean that every employee has a say in every corporate decision, but that coordination is achieved through information sharing, self-managed work teams, and shared values. This also means using a system of rewards and punishments administered by peers, by teams, by managers, and by employees themselves. Companies operating this way need to be mindful of the fact that the modes of punishment must be clear and swift to keep business on track.

Characteristics of a Good Measurement System

In order to be successful, goals that are important to the company must be measurable in some way, and these measurements must in some way relate to each employee in the company. A good measurement system must have the following:

  • Completeness. The metric must adequately measure the phenomenon rather than only some aspect of it.

  • Timeliness. The metric measurement must be taken as soon as possible after the event has occurred, rather than waiting for an arbitrary date (for example, a particular calendar date) or performed as an "autopsy" (for example, an exit interview or a returned product).

  • Visibility. The metric should be traceable openly by management and by those being measured.Sphere of Influence. The item being measured must be under the sphere of influence of, and available to the person being measured. In other words, that person must be able to do something to achieve the metric.

  • Cost Availability. Is the task being measured possible given any current cost constraints?

  • Interpretability. Is the metric open to any misinterpretation by those measuring and being measured?Importance. Is the measure connected to important business objectives, or is it being measured merely because it is easy to measure? Is this importance communicated to the employee?

  • Time Balance. Are there short- and long-term objectives?

  • Motivational Balance. Is the person being measured set up for failure? Are these metrics achievable? Does the measurement system reflect the desired balance between competitive challenge and collaborative teamwork?

Types of Rewards

There are two types of rewards: intrinsic and extrinsic. Intrinsic rewards lead to more sustainable behavior and revolve around the employee's internal satisfaction level. Extrinsic rewards are external, as the name implies. The following sections describe examples of each reward.

Intrinsic Rewards

Intrinsic rewards revolve more around how interesting or important the work is, level of participation, responsibility, feedback and recognition, opportunities for learning, job freedom/discretion, and diversity of activities.

Extrinsic Rewards

Extrinsic rewards relate more toward direct compensation such as performance options, profit sharing, and overtime; and indirect compensations such as health care and pay for time not worked. There are also non-financial rewards that normally involve prestige and status, such as getting the preferred office, a big title, preferred working hours or assignments, and miscellaneous perks.

Characteristics of a Good Reward System

There are several questions that need to be considered when developing a reward system. Here are a few of them:

  • Availability. How available is this particular award across the organization?

  • Eligibility. Which classes of employees (for example, hourly or non-exempt) are eligible to receive a particular reward?

  • Visibility. How visible is the reward to its recipient and to the company at large?

  • Performance Contingency. How much of the reward is based upon the recipient's performance?Timeliness. Can the reward be distributed soon after a decision is made to distribute it, as opposed to being delayed by calendar dates, employee anniversary dates, or a series of approvals? Be alert to creating small print that effectively pushes out reward receipt (for example, delayed performance bonuses if company performance lags).

  • Flexibility. How much can the reward be tailored to the needs of individual employees?

  • Reversibility. Can the reward, once given, be reclaimed? These sorts of rewards are not recommended.

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