The Importance of Output-Based Bonuses
Today’s guest post has been written by Tom Castley, Vice President, Xactly EMEA
The UK is in the midst of what some are calling a ‘productivity problem’. ONS’s latest Labor Productivity statistics highlighted that productivity grew by just 0.5% in the first three months of 2016, compared with the last quarter of 2015, which is significantly low.
One of the issues today is that people have more options and desire to work in the way that best suits them. However, companies do not always recognize the needs of their employees, or respond to them accordingly, and as a result, an unproductive culture is born. We are operating with a diverse workforce that spans four generations, each of which has grown up in different ways and as a result, work and think differently. For instance, research has found that over 40s believe that a three day working week is optimal. In light of these differences businesses should consider moving to output-based management and reward, rather than only paying people based on their time or effort. This approach would be appropriate for millennials, for example, who tend to work very hard and quickly periodically.
So how can this approach help tackle the productivity puzzle?
To start, flexibility should be promoted. Currently, there is a culture of praising people for “being busy”. One flaw with this is that it prioritizes time and effort rather than the actual output and end result. Introducing flex-time off and offering access to company mobile devices can make a world of difference. Rather than measuring a person’s productivity by the amount of actual face time they have in the office, this approach advocates employees working when they are motivated. It gives individuals more options to pick and choose the working hours that suit them best in terms of their personal or family commitments to maximize efficiency and output. Allowing employees to work in the way they believe works best for them offers encouragement to work better, and be more productive. For this approach to work properly it requires a level of trust between employers and employees; employees cannot take advantage of having the flexibility to work as and when they want. Both parties need to sign up to agreed targets to easily track progress and measure the output.
What is measurable output?
Output can be measured in different ways, but should always be aligned to business goals. For example, a software development team’s aim might be achieving a level of bugs that is lower than the industry standard. We employ this system at Xactly where we reward our developers with bonuses if they develop software that has fewer or no bugs once it is released. This has dramatically improved our programming and the quality of our software.
So, how does this translate in business?
- People like to work differently. It has been noted that older generations find they can achieve the results they need working just a few days a week. On the other hand, younger generations are more typically productive in bursts throughout the week. As long as the quality and output of work remains to agreed standards companies should be able to facilitate ways of working that best suit their employees.
- Businesses need to provide flexibility. In today’s modern workplace there is no excuse, as they should be able to facilitate this through business applications and mobile technologies. However, there needs to be respect and trust between the business and its employees so that effort and time is focused on reaching unified business goals.
- Finally, businesses need to ensure they are measuring output of what is truly going on to make a significant impact on the business. People can spend hours on a task and say that they are “busy at work,” but if the result isn’t going to help achieve the business goals then it is null and void.