Rule 11: Accountability

Incentives: Accountability With Responsibility - Incent For What Can Be Controlled

A basic rule of management extends to incentive/bonus/merit plan implementation: don’t hold people, or groups of them, accountable for what they don’t control.

If a manager does not fully control office labor costs (i.e. they’re generally budgeted at headquarters), don’t base an incentive on it. If loan processor has no influence on the quality of documentation he receives, don’t hold him accountable solely for processing speed. If a customer relationship officer is on a team that is jointly responsible for a portfolio of customer relationships, make sure that team members are jointly rewarded for successfully doing so.

In defining incentives, collaborate with the workforce to define their three to five Critical Job Factors: those performance factors essential to job success (or alternatively, those factors that if not done would result in termination). Identify these at both the individual and team/group levels, since most workforce members have job objectives based in various parts on individual and cooperative group responsibilities.

Then, for each Critical Job Factor, define a relative priority Weighting, so that Weightings of all Critical Job Factors sum up to 100%. Weightings signify the relative Priority of each Critical Job Factor; some more important than others. Don’t let any Factor have a Weighting of less than 10% to 20% (depending on the number of Critical Job Factors), so that none of the Factors get ignored because of relative insignificance.

If an individual or workgroup has a job role where the process or outcomes are largely outside of their control, don’t tie much substantive variable compensation to it; it will likely be ignored as Irrelevant.

Effective incentive/bonus/merit pay reinforces Priorities, which supports Certainty, which drives performance management success.

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