Bonuses Should Reward High Organizational Performance

I've written a few times here about my experiment with The Four Disciplines of Execution, or 4DX, as it is often abbreviated. The last time I wrote about it, I was dissecting the experiment I've run to date, and offered up the three factors that caused us the most difficulty.

If you're interested, go here for the full blog post. When talking about the second factor, an admission that it was unclear that all of the "Wildly Important Goals," or "WIGs," that we had chosen truly mattered for our organization's overall success, I shared the following information:

Partly in response to that dynamic, and partly to give the best WIGs more focus in our whirlwind of activity, I decided mid-year to attach financial bonuses to some of the metrics. Ten metrics made this cut, and the message was that if the goals associated with them are achieved, the entire staff would receive a designated bonus at year-end. The proposal was met with enthusiasm when first rolled out, but as time wore on, and some of the goals fell unachieved by the wayside, the remainder have been sucked back into the whirlwind. A certain kind of fatalism appears to have taken over, and more than one staff person has told me that they don't believe the metrics actually are things they have the ability to affect.

Ever since I wrote that, I've been meaning to come back and talk about it more expansively. Our fiscal year has since ended, and I can report that of the ten metrics I identified for bonus consideration, only two were achieved by me and my staff. And what I said about a kind of fatalism setting in stayed with us to the very end. It's as though, collectively, we said, "Well, we might achieve some of these goals, and we might not achieve others. If we knock a few of them off, we'll get a little more money out of the deal, and that will be nice. But is it really worth doing something different? Or putting in more time? After all, it's not like we really have control over these things anyway."

As a supervisor, it was a frustrating experience. But now I'm in the process of formulating this year's bonus plan, and I have to figure out a way to take a productive step forward. And based on last year's experience, I'm thinking of moving in two distinct directions.

1. There will be fewer bonus goals next year, and they will more obviously be connected to the overall success of the organization. This one seems obvious. If I want to use our bonus structure to focus our attention on the things that matter most, giving us too many targets to shoot at is probably counterproductive. Three, or perhaps four (not ten!) goals seem about right, and not only do all of them have to be things that are unquestionably part of the organization's overall ability to grow and improve its execution on core programs, they have to be the kind of things that no one person can achieve on their own. Individual achievement is great, but our bonuses are meant to reward team achievement, so let's make sure the targets are things that require people to come together and work productively across departments.

2. They will be more, not less, difficult to achieve. This one I feel pretty strongly about. Just because only two of ten goals were achieved last year does not mean that the targets were set too high. Because the targets are not meant to be indicative of our ability to achieve them, but indicative of the level of success that is necessary to grow and improve the organization. That's why I am justified in attaching bonus incentives to them. If they were easily within our reach, they wouldn't be bonuses at all. I'd just add them to someone's job description and expect their successful completion. Paying out bonuses is not something I have to do, and if it's going to happen, it should be in response to things that elevate the overall performance of the organization.

I doubt either of these decisions will make me very popular. They may, in fact, breed more of the fatalism that I saw last year. If they are too difficult, after all, why should long-tenured and well-compensated staff members even try?

I can't answer that question. At the end of the day, I think, I can only decide what it is I want to reward in our organization, and set up an appropriate system for rewarding it.

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This post first appeared on Eric Lanke's blog, an association executive and author. You can follow him on Twitter @ericlanke or contact him at eric.lanke@gmail.com.

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