Tom Wipple in The Times summed up the recent exam fiasco perfectly by saying that moderating pupils’ exam grades based on past school performance would be ‘unfair to exceptional children in unexceptional schools’ and ‘overly kind to unexceptional ones in exceptional schools'.
It got me thinking about how much this statement applies to company bonus plans too.
Due to Covid-19, students were unable to sit exams. In order to avoid grade inflation, the Government attempted to implement an algorithm to moderate teacher-assessed GCSE grades.
This was met with fierce opposition and resulted in an embarrassing U-turn.
Being a reward professional, I have to admit I was actually quite comfortable with the algorithm! Many bonus plans generate a bonus pool based on company performance. If you give out too many high awards, and too few low awards, you exceed the pot. There has to be some degree of moderation involved.
Company performance metrics are a key aspect of more and more bonus plans. They encourage collaboration and team work towards shared goals, and ensure affordability.
But whether they are used to generate the bonus pool, which is then allocated based on individual performance, or used to generate a pool which is equally shared, taking account of company performance will adversely impact exceptional employees in unexceptional performance years, and benefit unexceptional ones in exceptional performance years.
So, what can we do?
My answer to this is that no matter how well designed your bonus is, it will only be truly effective if the individual contribution of exceptional employees is acknowledged in some way.
And my recommendation is that whenever a company bonus is launched, it is done so alongside a commitment to creating a really strong culture of recognition. One where exceptional behaviour and achievements at an individual (and team) level are noticed and celebrated in the moment.
This ensures exceptional employees are rewarded regardless of whether it is a good, or poor, performance year.
Conversely, how do we ensure we are not overly kind to unexceptional employees? Well that comes down to how you manage performance….
Photo: courtesy of dcJohn