LESSON SCRIPT

Using Performance and

Rewards Processes to
Motivate and Engage
Using Performance and Reward Processes to Motivate and Engage | LESSON SCRIPT
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Welcome back! It sounds like there’s some friction at EdgeDotGrow. It
also sounds like there’s a lack of clarity around the company’s perfor-
mance and reward processes.
At the outset, I want to mention that these are two topics that should
be dealt with in a comprehensive manner, and that in this lesson we
won’t necessarily dive into all the details. Rather, the aim is to provide
you with a brief overview of how you can practically implement these
practices in your organization. Today, you will learn the foundations of a
solid performance and reward practice. You’ll then learn how to design
a basic performance and reward process, and how to link performance
to reward outcomes.
Performance and reward are two of the practices with the biggest
impact on employee engagement and, if done incorrectly, lead to a lot
of discontentment. Often, though, this is based more on perception
than reality, as we saw from the watercooler conversation between
Rupert and Marian. But how do we address these rumors?
THE FOUNDATION OF SOLID PERFORMANCE AND REWARD
PRACTICE
Performance management has a checkered past. Not because the prac-
tice is not important or value-adding, but because of how organizations
have abused the practice, taking a punitive approach. The intention of
performance measurement is to first, clearly articulate the expectations
between an employee and a leader to understand what success would
look like. Second, to provide continuous feedback from multiple stake-
holders to acknowledge good performance and correct misaligned per-
formance. And lastly, to provide employees with developmental feed-
back and a rating as a basis of reflection.
Like a lot of other things, a performance process can only work if there
is an environment of trust and respect. Unfortunately, where this is
not the case, performance processes are often used as the proverbial
“stick” and not experienced by employees as a process that sets them
up for success. A solid performance and reward process is based on
four principles.
• Transparency: How you measure performance and determine
reward needs to be transparent and leave no room for ambigu-
ity. These processes can quickly become subjective, so you have
to ensure that there is trust in the process of how you set up the
practice, how you implement it, and how you give feedback to
employees.
• Consistency: Beyond transparency, these processes need to
be consistent. Consistency breeds trust as people learn what to
expect, and it also fosters an understanding of what is accept-
able and what is not.
• Fairness: If you struggle to explain the decisions you have made
in a performance or reward process to employees, you might be
doing something wrong. The third principle, fairness, refers to
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being able to openly justify and explain the decisions made, and
those decisions being deemed as acceptable. For example, what
criteria did you use to determine bonus levels? Are these fairly
and consistently applied?
• Simplicity: Finally, the simpler these processes are the better
as it leaves less room for interpretation. Always ask yourself
whether anyone would be able to run the process without you in
the room, only following the steps that have been outlined.
Most HR professionals have horror stories to share about performance
and reward processes that have gone wrong. But what if there was
another way to approach it?
Take a moment to complete a short assessment and evaluate your own
reward process below.
HOW TO DESIGN A PERFORMANCE AND REWARD PROCESS
Step 1: Define success
To do that, she first needs to define success. Pirating is a tough busi-
ness, and to be successful there are a number of key considerations for
Captain Lindani. She needs to find enough treasure to be able to fund
her ship, pay her crew, and also pay back her original loan from the
Pirate Bank that she used to buy her ship. She also wants to be known
as the most effective and efficient pirate across the seven seas with the
most loyal crew. Word gets around the swashbuckling circuit.
In organizations, success is defined through the vision and strategy of
the organization. Captain Lindandi described what success would look
like with a few key success metrics. For example, the amount of trea-
sure, the efficiency, and the loyalty of the crew. In organizations, these
are key performance metrics or goals—they need to be stated in a way
that there is a clear yes or no answer. For example, “Did we reach our
goal of 100,000 new sales for this quarter?”

To help you design your own performance and reward process, I am

Step 2: Set the course
going to use the metaphor of a pirate ship setting out to explore far-
Next, Captain Lindani needs to set the course. For Lindani and her crew
away lands and find hidden treasure. We meet Captain Lindani, a fierce
to achieve these outcomes, they decide on the following:
pirate with a reputation of taking no prisoners and seeking adventure
aboard her ship, the Maverick. She is preparing to embark on a new
1. They will sail towards unexplored territories as they believe that
voyage and wants to make sure that her crew is set up for success. She
there is unclaimed treasure there.
will follow a simple seven-step process to gear her for her journey.
2. They will plunder other pirate ships on the way to complement
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their own resources, but they will only plunder commercial In organizations, this is communicating the strategy and focus, and is
fleets. often done through activities such as town halls or engagement ses-
sions. The intention is for the leadership team to help everyone under-
3. They will only hire the best crew, and preferably no one that is
stand the strategy and goals of the organization and clarify any ques-
new to piracy—they cannot be trusted.
tions about the focus and what success entails.
4. They will be prudent with their fresh water and vegetables, as
this is the cause for most failed pirate missions: dehydration and
scurvy.

5. They will avoid the Northern Fleet as they have taken it upon
themselves to rid the seas of all pirates.

In organizations, these are often referred to as strategic focus areas or

key performance areas.

Step 3: Tell the crew

Captain Lindani calls her crew together at their local hideout, the Cove.
She shares with them the plan to sail to the unexplored territories.
Some of the crew are excited about the prospect of adventure, while
others are more tentative given the rumors about the Northern fleet. Step 4: Identify contribution
They ask a lot of questions, and Lindani takes the time to explain their
Each of the leaders confirm the roles, expectations, and measures of
plans, alleviate their fears and also address any outstanding queries.
individual crew members. For example, the quartermaster is in charge
She ends the meeting by asking her second in command team, the
of resources and supplies, and they clearly articulate that their con-
quartermaster, the sailing master, and gunners to discuss with their
tribution to the voyage is to a) make sure they have sufficient water
teams and come back to her with proposals on what the different areas
supply, b) to ration the food according to pirate rank, and c) to run the
need to do to achieve these goals.
cooking schedule on the ship. The quartermaster splits the team into
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three: the first focusing on water supply procurement and protection,
the second on food storage and stock, and the third on the kitchen
operations. He is also very clear about what the measures of success
are for each of these activities. For example, “The chef needs to ensure
that the pirates are fed within the constraints of the budget.” Each indi-
vidual has no more than three clear goals and three clear measures.
This step is when team or departmental goals are set in alignment with
the overall strategy. In organizations, this process is often referred to
as cascading goals—the intent is to align all activities. For example, if
the goal is to reach 100,000 new sales per quarter, the outbound sales
team might aim to contribute 50,000 new outbound sales per quarter.
For enabling functions, this gets a little more difficult, but HR could,
for example, state: “Ensure we have the right sales team with the right
skills to deliver on targets.” What is critical to get right in this step, is to
contract against a shared and understood scale.
You’ll find an example for your HR Playbook in the resources below.
Step 5: Provide direction
Fifth, Lindani will need to provide direction. They set sail and Captain
Lindani decides that she wants all hands on deck, every morning for an
update on progress. She wants to monitor food supplies, crew health,
navigation, and weather reports. She uses this information to assess
priorities, correct any actions that could move them off course, and
above all, remove any obstacles in their way—even if this means that
they have to make a few pirates walk the plank.
In organizations, this process is often referred to as status check-ins or
business reviews. These can happen at a company level, or at a depart-
mental level. This activity provides the overarching narrative for individ-
ual feedback, which is the continuous process of helping team mem-
bers understand where they are doing well, where they can improve,
and to continuously check alignment with the overall goals.
Step 6: Give feedback
The sixth step in creating a performance process is to integrate feed-
back. The quartermaster speaks to each of his team members fre-
quently and gives them feedback on decisions that are made that could
impact their delivery. He asks them to also raise any issues that will
stand in the way of reaching their targets and to flag any risks that he
needs to be aware of. He points out where things could be done differ-
ently and how to correct some behaviors. He gets feedback from other
pirates onboard about the team and shares it with each person. For
example, there are some complaints about the stale cooking and a risk
that the water supply is running low.
In organizations, feedback is sourced from various stakeholders and
usually includes a 360-degree perspective: the employee’s direct line
manager, peers, team, and direct reports if applicable. Feedback is con-
solidated and the manager and employee agree on a final rating. This
does not come as a surprise, as the continuous dialogue and feedback
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has helped keep the employee on track, or alternatively highlighted
where the challenges are to the employee throughout the performance
period.
Step 7: Share the spoils
Before each crew member signs up for the voyage, there is agreement
on how they will be compensated, regardless of whether they find any
treasure. Different ranks are paid differently, depending on the skill,
experience, and knowledge they bring to the voyage. For example, the
sailing master receives a higher compensation as navigation is a critical
skill and in high demand. The cabin crew are paid less, as this is a junior
rank and there is a high number of available pirates to fill these roles.
To motivate the crew, Captain Lindani also decides to incentivize them:
Each man and woman on the ship will share in the spoils of the treasure
depending on the size and their individual contributions to the voyage.
Captain Lindani differentiated between two elements of reward. First,
she set criteria on how to determine base or guaranteed remuneration.
This is the salary or wage component that each crew member will earn.
She used basic grading criteria such as scarcity of skills, supply of tal-
ent, level of responsibility, and impact of decision-making to determine
the range of pay in alignment with what she can afford. This is agreed
with each crew member before they join the voyage.
In organizations, this happens through salary benchmarking and grad-
ing. There are various methods you can apply to determine grading
levels, but regardless of which you choose, it is important to apply the
process consistently and to be transparent about how you determine
pay levels. This is often where employee perception comes into play
and you need to be comfortable that you are following an unbiased and
objective approach.
As part of the guaranteed pay, there are also other benefits that are
considered such as medical aid, pension, or in Captain Lindani’s case,
food and lodging on the boat. To motivate and incentivize, she puts in
place a shared bonus scheme for all crew members to share in the suc-
cess of the voyage. Again, this is pre-determined based upon set crite-
ria on how to distribute this money fairly across the different levels. In
most organizations, criteria such as performance rating and organiza-
tional level play a role as key criteria on determining bonus schemes.
A critical success factor in this process is to equip your leaders and
managers to a) understand how you approach performance and reward,
b) give them the skills and tools that they need to have these conver-
sations with their people, and c) support them throughout the process
where they struggle. Remember, they own the relationship with the
employee, and your role as HR is to facilitate this process, not run it on
their behalf.
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CONCLUSION

And that brings us to the end of this lesson, matey! Today, you have
learned the foundational principles of a solid performance and reward
practice. You then learned how to design a basic performance and
reward process, using Captain Lindani and her pirate crew as an exam-
ple. And finally, you saw how to link performance and reward outcomes
and how managers are a critical factor to make this process succeed in
your organization.

I hope this lesson has equipped you to set up these processes in your
own organization. In the resources below, you will find some great tem-
plates and tools to get you started. All hands on deck, and bon voyage!