Tuesday, 29 July 2014 05:46

The Wrong Bonus Plan Can Be Much Worse than None at All

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In my article The Process of Winning (see Autobody News, June 2014 edition or in my column section of the Autobody News website) I briefly explained why it is important for collision shop leaders to reward the vital behaviors that contribute to a proven process being carefully followed instead of only offering incentives for end results.

In this article I am going to expand on this idea as well as challenge the thinking on what a good bonus program should look like. Let me be clear about one thing, this article is not referring to technician commission systems, but instead the bonus, or incentive plans that are used as an attempt to motivate managers, estimators and other administrative staff.
When it comes to technicians I have conflicting views on commission systems, but mainly support them unless they are tied to a bad bonus plan. I will illustrate my points by beginning with a story.
Once upon a time, a body shop owner that I worked for approached me about creating a new employee bonus program for his company. “What is wrong with the bonus program we have now?” I asked. He told me “Every time someone doesn’t make bonus, they are ticked off at me!” Then he confided, “If the estimators come close to meeting their sales and CSI objectives I usually give them some money anyway as a kind gesture, I want my people to be happy, but they still don’t seem to appreciate it.”
After spending considerable time interviewing the employees of this sizable MSO, there were several things I discovered.
1. Almost every admin employee had a slightly different bonus plan than the next guy or gal.
2. Many admin employees said they had given up trying to reach the benchmarks and felt they were set too high.
3. All admin employees felt that they didn’t have enough control over the factors leading to their bonuses, thereby making it “unfair.”
4. Most employees complained that company leadership changed their bonus plans often, sometimes two or three times a year. Some employees said they felt like the bonus plans would change whenever it was convenient for the company to “bilk” them out of their money.
5. Employees acknowledged that the bonus plans caused motivational silos which caused them to sometimes perform well at things they are being measured for, but poorly at those they were not being measured on.
6. When pressed a little, most of the employees said that the bonus plan was more of a de-motivator than a motivator!
So it seems the boss was right! The employees not only were unappreciative of his “kind” gestures, many were absolutely fed-up and ready to look for another job! How could something intended to motivate the employees have the complete opposite effect? With so many problems in play, it was difficult to determine which employee complaints were justified and which were just lazy employees looking for an excuse. Either way, it was clear the current admin bonus plan was creating a lion’s share of the discontent.
Although it took me several years of failed incentive programs to figure it out, I now know there are several forces at play here that can make these systems fail miserably.
Here’s what the boss unknowingly did wrong.

● Employee bonuses made up too large a percentage of overall wages, so if employees didn’t make bonus, they didn’t have enough money to pay their bills. Understandably they felt punished.
● A handful of the employees felt that management was not paying them what they had agreed upon when hired.
● Created unrealistic benchmarks for people to reach without considering market fluctuations and unforeseen circumstances.
● Held people accountable and incentivized only on end results such as outcome KPIs.
● Jeopardized the whole system by breaking the rules and giving out partial bonuses to key people.
Even though the boss did several things wrong, many pieces of his bonus program closely resemble those found in many collision businesses in this country. Results-based admin bonus programs are extremely common in many industries because on the surface they seem to be fair and just. Who could find fault with a system that is as old as time and that pays people based on the results they produce? I’ll tell you who. The millions of hard working people that are negatively affected by this madness every day! If you think that I am being overly dramatic, ask yourself this question. What are we trying to accomplish by offering a cash-based incentive program? What is the goal? Although there could be many goals, most would list the following two most basic and worthy goals.

1. Motivate the employees to get results, KPIs, Sales, etc.
2. Attract and retain good people
If these are your goals as collision shop leaders, are you happy with the results your bonus program is contributing towards reaching these goals? If so, congratulations! Everyone else may want to read on.

Solution #1 - Become Process Driven
What behaviors are we really trying to influence?
If the goal is to produce good results, then management needs to look at the individual tasks that make up the processes. So if a shop has crummy processes, then wouldn’t it be unfair to hold people accountable for the results produced? Since it is the individual tasks of the process that determines the outcome’s success or failure, then individual task execution should be where management looks closely for the vital behaviors to take place. Let me give you an example.
Blueprinting a vehicle is a very important process to achieving desired results. If people fail at Blueprinting, there is a good chance that CSI and cycle time metrics could suffer. The guy doing the Blueprinting probably knows this fact whether or not you are giving him a bonus. The question is this: Does the guy doing the Blueprinting know what specific tasks are involved to ensure a consistently accurate repair plan? What vital behaviors does he need to execute?

1. Review vehicle check-in sheet
2. 100% meticulous disassembly
3. Photo documentation
4. Separate good parts from bad parts on table
5. Use group sequenced arrow down method in estimating system
6. Load parts cart, separating good/bad parts
7. Verify Blueprint accuracy on printed estimate to repair
8. Go over completed Blueprint with technician
If the Blueprint guy properly follows these eight steps, one can expect a consistent quality standard every time. So if management wants to incentivize him and change his behavior for the better, they would want to tie these eight specific tasks to his incentive, not some outcome he has limited control over like cycle time or gross profit. Yes he has some control over cycle time and gross profit, but he has ALL the control over following the proper process in Blueprint. Use your own creativity; what would you do to ensure that all the vital behaviors of Blueprinting were being followed? What could you do to reward him or her?
Solution #2 - Identify What Truly Drives Motivation
What is truly important to our employees?
The reason most bonus plans fail is that they actually demotivate the staff! In Daniel Pink’s book, DRIVE, he states: “The best use of money as a motivator is to pay people enough to take the issue of money off the table… But once we’ve cleared the table, carrots and sticks can achieve precisely the opposite of their intended aims.”         Pink is right. In fact, scientific studies have revealed that when you use rewards expecting to gain the benefit of increasing another person’s motivation and behavior, they often incur the unintentional and hidden cost of undermining that person’s intrinsic motivation toward the activity. This problem is severely compounded when management gives employees a bonus for routine work, and then takes it away from them later on while performing the same work. This causes the employee that once was happy to perform his job at his regular pay, to now be discouraged and unappreciated performing the same job.
So what can leaders do to motivate employees? From the dozens of studies I have read there is one important thing that appears on every list. People want to be RELEVANT. Everybody wants to feel that what he or she is doing will make a difference. If leaders want to have a motivated work force, start there! Top leaders figure out how to tie employees’ values to vital behaviors that will then produce the desired results you are after. There will never be an incentive program that can make up for the lack of proper management and leadership! There are many ways to connect to employees’ intrinsic needs and thereby motivate them. Here are a few suggestions:

● Give small tokens of appreciation such as $10.00 gift cards for properly following key processes.
● Make the workplace a safe environment for everyone to contribute their opinions and ideas freely. This will help people become relevant.
● Read these books, available at Amazon..
▪ Drive—Daniel Pink
▪ Influencer—Patterson, Grenny, Maxfield, McMillan, Switzler.
● Leaders need to listen to people carefully. What are they actually saying? It may not be what you think you’re hearing.
● Praise work being done correctly more often than you may think necessary. Praise from someone not known for offering it is much more powerful than you may realize.
● Punish those that violate your company’s values.
● Make relevance more important than monetary rewards.
● Consider re-evaluating bonus plans to be more in-line with employee values and critical processes, or just eliminate them altogether and pay people what they are worth.
● If you insist on a bonus system, make sure the bonus is 10% or less of overall wages.
Many readers may not like or agree with these “soft skills” being used in place of the old dependable bonus plans that we are used to, but we are not living in the old days any longer. When holding on to these antiquated ideas, it is easy to see why many in our industry find difficulty understanding the new generation of worker and what truly motivates them. When leadership does not provide the employee with what they are truly hungry for intrinsically, eventually it becomes only about the money for them. In other words, because many lack the necessary leadership skills, they use extrinsic motivators instead to get the job done and often with mediocre results. As Daniel Pink pointed out “The best use of money as a motivator is to pay people enough to take the issue of money off the table.”
This article is rooted in behavioral sciences that are factual not merely my opinion, however, it is my opinion that the era of the iron-fisted manager is nearing its end. Those that embrace modern leadership skills have the best chance to prevail.