January 19, 2011

Performance Awards in Organizations

The annual performance awards in most organizations is the occasion when the management recognizes the contributions of high performing individuals and programs in the organization. The purpose of such awards is to inculcate the spirit of healthy competition in the organization.

Another purpose is for the management to demonstrate in clear terms to the masses what is the "right" behavior that would earn recognition and rewards (referred to as R&R in many HR-driven organizations).

Such awards also give opportunity to one and all to celebrate organizational success stories and may also be clubbed with a gala party for all the employees.

What happens before such events is more interesting and intriguing a tale than what happens in such events.

The discussions and decisions behind the closed doors where the success stories (individuals and programs) are finalized need closer look to understand what such events finally end up achieving (whether acknowledged by the management and HR folks or not).

Here are few points to ponder about:
  • The program/project that goes through maximum crises becomes a natural choice in the name of stretched targets being achieved. This is generally true in case of a team working on new types of programs/projects or on programs/projects with tight deadlines or on high profile, strategic projects. And by definition projects that run smoothly will fail to make the grade. It is hard to imagine a program/project getting rewarded if it ran smoothly and never went into crisis due to proactive actions by the team.
  • The individual who worked on critical assignments becomes a natural choice in this case. Someone who brings maximum dollars through a new project is also a natural choice however this works only in the fist year of the project. And by definition a smooth, silent worker will fail to make the grade. It is hard to imagine an individual getting rewarded if he/she worked smoothly and never went into crisis due to proactive actions.
Overall it appears that the driving factors for such rewards are around results (generally in terms of money) and not values. So this may encourage behavior where "what" is a clear winner and "how" is a distant second.

This also encourages the tendency in a typical employee to be part of only the "award-able" programs/projects and also "getting it done" somehow. In such a situation the values the organizations tends to so proudly flash everywhere may gradually start loosing its sheen and make the employees not to take it  seriously.

Taking this further, it may even lead to ethical breakdown in the organization. There are ample cases to demonstrate that:
  • Kenneth Lay of Enron was one of the highest-paid CEOs in his time (results driving rewards) until the Enron scandal broke out due to the "how" behind the "what" not being fair and ethical (value breakdown)
  • Ramalinga Raju of Satyam won several awards and global accolades (results driving rewards) until that infamous letter he sent to the company board admitting the massive fraud going on for years altogether (value breakdown)
The above illustrates the point that value-based rewards are better in the long run than results-based rewards.

This idea means that even if a program/project made a loss (for uncontrollable reasons) but displayed full respect to organizational values (including the systems and processes) it should be rewarded rather than a program/project that made a lot of money but ignored the organizational values.

Right values will yield into right results in the long run in a sustainable manner.

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