People that follow my work know how passionate I am about topics such as performance appraisals, along with the myriad goals and objectives attached to the performance of a person. If you want to review my previous work just click here. This blog post will be fully dedicated to how goals and objectives attached to monetary rewards can jeopardise a product release and therefore a company.
Some weeks ago, I went for dinner with my friend Herman. I could see that he was worried and stressed, so I asked him: “What’s the problem? Why are you so stressed?” Herman started to explain to me that the company where he was working was going through a crisis. He told me the company needs to put a huge product out by the end of the year, or they could run into drastic problems.
I described a bunch of tools and ideas that he could use to help the company deliver a Minimum Viable Product(MVP) by the end of the year. In all likelihood, the product would not contain everything that the company wanted, but for it would certainly have the most important features needed to go live. You can begin to learn more about those ideas and tools in Vasco´s blog post right here.
Herman then explained the situation further: it was much more serious; for the new release, the product management team had dozens of KPI´s that were part of their yearly Goals and Objectives. In order to receive the bonus for that year everyone would need to achieve their goals and objectives, otherwise no one would get extra money.
Herman then explained to me that this practice could hijack the release completely. Since everyone on the product management side had all their goals and objectives attached to those KPIs, they were designing a product much more complex than a Minimum Viable Product(MVP) — All to ensure that they would get their bonus. Of course, when everyone asked them if all the features were necessary, they always said: “Of course; we cannot remove anything”.
I could not stop smiling at the situation; for years I have been preaching how Goals and Objectives attached to monetary rewards destroy companies, but now I was presented with one of the simplest examples of how goals and objectives can do exactly that. This example was so simple that even the most innocent manager could predict the outcome.
Herman knows that I am writing a book about the topic, so he asked me for some advice; what could he do? What, in that situation, would be a good idea?
So, I suggested to him what many companies already have done: Many companies used to adopt a technique where 90% of an employee’s salary was base salary and the other 10% was based on individual performance. To obtain this 10%, the individual had to reach his goals and objectives. Some companies came to understand this is more harmful than beneficial, so what they did instead was just give the 10% to employees and forget the individual performance aspect. They simply stopped mapping individual performance with bonuses.
To give another example, other companies removed sales bonuses. They simply looked into the history of each sales manager and gave salary increases to match their best bonus. When given really great base salaries, sales managers are happy and eager to help the company to sell more; people switch from closing deals to creating relationships. Before you start to criticise this polemic approach, I want to tell you that this is real, and I will have several examples in my book :)
Herman was a bit reluctant about implementing my suggestion, but he agreed that he would talk with the C level and ask them to remove all these goals and objectives attached to the bonus system.
In couple of weeks we will have another dinner where Herman will explain me what happened.
This blog post is part of my new book that I am writing: Get Rid of Performance Reviews, if you are interested in the topic please subscribe as a Beta Reader and receive the 1st part for free right HERE.
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How monetary rewards destroy your Minimum Viable Product