December 1995

Innovative Reward Systems for the Changing Workplace

Thomas B. Wilson has written a book that is chockfull of guidelines and principles for designing performance management programs. In his book, Innovative Reward Systems for the Changing Workplace, Federal managers, program design teams, and human resource specialists will find both theory and practical applications that will be extremely helpful when dealing with the challenge of redesigning their current programs.

Wilson views rewards programs as including base pay, appraisals, and various kinds of awards. That is why his book, which would appear to be solely about reward systems, includes an in-depth chapter on managing performance. While the chapters on base pay and stock options don't apply to Federal employees, the rest of the book is rich in practical, useful wisdom and guidelines for designing new programs in any work situation.

• Effective Reward Systems
• Performance Management
• The Do's and Don'ts of Effective Reward Programs

Effective Reward Systems. Reward systems should focus on positive reinforcement. Positive reinforcement is the most effective tool for encouraging desired behavior because it stimulates people to take actions because they want to because they get something of value (internally or externally) for doing it. An effectively designed and managed reward program can drive an organization's change process by positively reinforcing desired behaviors.

The author presents criteria for building effective reward systems that he calls the SMART criteria. These criteria should be used when designing and evaluating programs. Programs should be:

• Specific. A line of sight should be maintained between rewards and actions.
• Meaningful. The achievements rewarded should provide an important return on investment to both the performer and the organization.
• Achievable. The employee's or group's goals should be within the reach of the performers.
• Reliable. The program should operate according to its principles and purpose.
• Timely. The recognition/rewards should be provided frequently enough to make performers feel valued for their efforts.

Performance Management. Wilson urges organizations to get away from thinking of the annual performance appraisal process as performance management. He comments:

"I would recommend that the organization refocus the performance appraisal process away from all the varied attempts to justify its existence and concentrate instead on the process of managing performance."

The process of performance management reflects how the work gets done and creates the environment in which people feel valued for their achievements. The performance management process includes four critical components:

• Focus on what is important to change or be improved.
• Measures to determine whether and how much progress is being achieved.
• Feedback so that performers will know whether and how much progress is being achieved.
• Reinforcement so that everyone celebrates achievements as they are unfolding.

• All measures are understood by the employees, who can describe the importance of their activities to the agency. Measures address results and behaviors/processes.
• A tracking system is used to monitor performance in the areas identified.
• The performance measures and progress are displayed in a public area.
• Data on the performance charts is current.
• The team leaders/managers are actively engaged in coaching staff members and providing assistance to improve performance.
• Periodic celebrations mark achievements as they are realized. These celebrations are regarded positively by employees.
• Data indicate performance is improving.

• focus on variables critical to success;
• create timely, chart-oriented feedback;
• create celebrations that mean something to the performers;
• use performance reviews as an opportunity to reflect "how we won" and "how we lost" make them as often as necessary to cement the learning;
• anchor the memory of achievements achievement-oriented firms measure a lot, accomplish milestones frequently, and do much celebrating;
• don't rely on annual performance appraisals as the sole source of feedback;
• when designing programs, avoid copying programs used by other organizations; and
• don't make the design process into the "let's make a form" game.

The Do's and Don'ts of Effective Reward Programs. The Do's and Don'ts of Effective Reward Programs. Wilson summarizes his book by reviewing the fundamental principles for designing reward programs that work:

• Do it now! Putting off change only makes the situation worse.
• Keep your eye on the needs of the customer. The customer should be at the center of all measures, goals, and objectives.
• Take action, be proactive. Well-designed programs require management, which should focus on providing people with meaningful measures, realtime feedback, and ongoing reinforcement.
• Personalize rewards to their recipients. Rewards should be valued by the performer. The performer needs to see that the reward opportunities are directly linked to the effort and results taken and that there is an appropriate benefit to the organization. By personalizing the reward, you can anchor the meaning of the achievement more deeply than if you simply treat the reward as a mechanical administrative task.
• Make sure everyone can win. Reward programs built on the principles of competition or compliance are counterproductive, if not downright destructive.
• Make sure that rewards are contingent. Reward programs become entitlement programs when they lose their contingency on performance. Each reward should be fully earned and people should understand exactly what they have done to achieve it.
• Don't expect success all at once. The process of developing an effective program is one of change and continual improvement.
• Remember that you are in competition with other consequences. Reward programs simultaneously compete with negative reinforcements that occur throughout the organization. So rewards must be meaningful to the performer to have an impact.
• Do it from the heart. Rewards that are intended to be manipulative are not accepted by employees. The fundamental purpose of reward programs is to build a powerful partnership between the individual and the organization. Collaboration is an essential theme of success.
• Have fun while you are doing it. If a job is worth doing, it is worth measuring progress and celebrating achievements.