Is My Company’s Culture ‘Performance Based’?
Recently, I have had the privilege and opportunity to speak with owners and senior executives of privately-owned companies regarding the subjects of compensation strategy, planning and pay practices. In such discussions, the subject of employee, shareholder-employee or partner performance will invariably arise. A typical question asked is: How should differences in employee performance and contribution be recognized within a company’s compensation system?
The answer to that question depends upon a variety of factors and generally involves a mix that includes: job definition, expectations and variable compensation design. It is not our intent to try to discuss such a broad and open-ended question in this article—we will save that for another day. However, we generally suggest to a client or meeting participant that the best way to avoid pay and performance confusion within any organization is to develop & employ a performance-based culture. We believe this is a crucial first step. But, what do I mean by a performance-based culture?
A definition could be long, wordy and pretty abstract. But, let’s look at this from another perspective. Instead of a definition, let’s ask what are the typical characteristics that we see in a company with a performance-based culture? Here are six characteristics we most often observe:
- Everyone in the organization clearly understands their job and what is expected of them. [This also includes partners, stakeholders or family employees, if applicable.]
- Every job in the company has measurable benchmarks or standards of performance, and job incumbents know how they are performing.
- Employees place the practice of high-quality customer service at the top of their job’s priority list.
- Employees understand that they are responsible to both customers and peers for their actions and performance and are willing to shoulder that responsibility come good or bad.
- Employees in the organization are willing to collectively do what it takes—whether part of their job or not—to meet customer (or company) requirements.
- The company (and its owners) treat & pay its employees fairly, and employees know it.
Notice that the above emphasizes both personal & company responsibility and an acknowledgement that premier customer service is a requirement for premier company performance.
Do you recognize your company when you read the above characteristics? If so, your organization is likely an industry leader and has built pay & reward systems that effectively and fairly recognize individual performance and contribution.
If not, take out a piece of paper and chart your company’s performance or cultural deficits and why these exist. There generally will not be any mysteries, only a reluctance to recognize the problems.
So why is it important to have a performance-based culture? It is if you think it is a good idea to put a few extra points to the bottom line this coming year and attract top industry leaders to your organization. If you doubt that is possible, do some fixit work to improve the performance bias of your company and see what happens.