Working for many, many years in A/E firms as an owner, manager, employee, and board member, as well as serving as a consultant to thousands of more firms, has taught me a lot. I try to bring those lessons to you each week in this cover article for The Zweig Letter.
This week is no exception. I want to talk about conventional wisdom on how to pay out bonuses and how following those practices hurts your firm versus what I see as a tremendous opportunity for management to really step up and do their job.
So, it is generally accepted that the best (e.g., the biggest) bonuses should be doled out to your best people.
Seems to make sense, right? And a good manager will be discriminating – paying the highest bonus monies to those who did the best job – and the lowest – or none at all – to the weakest performers.
After this is accomplished by any number of different means, the manager can sit back and say, “I am a good manager. I pay my best people a lot more than I do the worst.”
Only there’s one big problem. The guy who got nothing is still there nine months later, but now he’s an even worse performer because he is angry with management. Management didn’t do its job.
This is why I am in favor of doling out bonus dollars in part, at least, on a more egalitarian basis. By creating an unfair situation (someone got bonus money that they shouldn’t get) it encourages management to do the right thing – either reforming the low performer or booting them off the team. You can’t just let them stay and earn less. Not an option.
If we did our individual and collective jobs as managers, of course, and hired the right people in the first place and then trained and coached them properly, maybe we wouldn’t have to worry about any of these things.
Mark Zweig is Zweig Group’s chairman and founder. Contact him at mzweig@zweiggroup.com.
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