THE JOURNAL OF LEADERSHIP APPLICATIONS
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Dare the Impossible – Achieve the Extraordinary.
Vol. 11, No. 6/7
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©1998, 2014 William A. Cohen, PhD


HOW TO REWARD EFFECTIVELY

“An ineffective reward might just as well be skipped. It could even have a negative effect. I once saw a military award so delayed that it demotivated the recipient. There are many factors which make for an effective reward, and it certainly doesn’t need to be monetary to count. The fact is, rewards can come in many different forms.

The Many Forms of What We Call Rewards
While most people will take all the material goods you are ready to give them, this is not necessarily the best way to reward them because compensation may not be the whole reason, or even the main reason that people perform at the highest levels or even at any level at all. It is a strange, but true, fact that in the 1880s, right in the middle of the Indian wars, Congress failed to appropriate pay for officers, including those in combat on the frontiers. Yet, most officers continued to serve throughout this period, including in combat, without pay. For almost two years they and their families subsisted on Army rations and living quarters that the Army provided.

Or consider Clarence l. (Kelly) Johnson. Johnson was the aeronautical innovator who founded Lockheed Aircraft’s super-secret “”Skunk Works,” a gathering of top Lockheed designers and engineers. There, Johnson and his group designed more than forty aircraft including the world’s fastest and highest-flying aircraft, the SR-71 Blackbird and developed a satellite, the Agena-D, that became our nation’s workhorse in space. Kelly was a magnificent engineer and manager, but he challenged his people to challenge him. If they disagreed with him, they had to put up a quarter bet. If he was right, the dissenter lost a quarter. Johnson didn’t lose many of these bets, but he himself said that he definitely lost some. The reward for being right obviously wasn’t the 25 cents, it was winning it from the boss. That’s a clear demonstration that you can have a very effective reward for contributing without it costing the organization much in terms of cash.

Fred Smith, founder and CEO of Federal Express, a former Marine Corps officer did the same with, “Bravo Zulu.” In the Marine Corps, that means “Well Done!” although it actually comes from the U.S. Navy Signal book, its origins are unimportant. What is important is that it’s a really effective reward and doesn’t cost Federal Express anything — but it’s very special and important to Federal Express employees.

The phrase “Well Done!” itself means something special to West Point graduates. It comes from the last stanza to the West Point “Hail Alma Mater” music known to all graduates. It goes, “May it be said: Well Done, Be thou at peace.” So the two words alone constitute an important reward.

In Ain’t Always Pay and Benefits
Recognition for good work was one of the top three motivators in a major motivational study. Pay was not. High pay could be considered part of recognition for good work. So this doesn’t mean that pay can’t be important, especially if you are under paying or going through tough times financially. However, unless you have an unlimited supply of money, high pay shouldn’t be the only, or even the primary means of motivating or rewarding.

That’s the trap that American industry got itself into. It started rewarding successful executives primarily through compensation increases. Over the years, this continually increased. Eventually, if top executives couldn’t get this sky-high compensation from one company, they felt unappreciated and unrecognized and went somewhere else where they could or thought they could be rewarded properly through higher pay. To be competitive and to keep the top management talent they needed, companies were forced to pay ever-increasing amounts. Partially as a result, top American executives are paid many times the salary of those who actually do the work at lower levels within their organizations. For example, CEOs in many other countries are paid 100 times or less the salary of their most junior workers, in many cases well under 100 times. In the U.S. top executive salaries of many major corporations are paid 300 times or more the salary of their most junior employees.

This is not really necessary to attract and keep top executives in many cases. It is far more than the ratio paid in the U.S. even thirty years ago. Our top military men, generals and admirals with responsibilities for people, equipment, and money that in many cases far exceed those of top executives in industry, are paid at a ratio similar to most executives abroad. Yet there are always many highly competent senior people waiting in line and hoping to eventually have the opportunity of being promoted into the top ranks.

Maybe you are one of these highly paid individuals and you think high compensation is a good thing. Better think again. This forces all salaries upward. This becomes a major inflationary factor to our economy, and it works against your own bottom line. Also, this siphoning off funds for executives unnecessarily cheats shareholders. More than this, it is a major source of dissatisfaction among those hundreds of other in your organization who aren’t sharing in this gluttony. These are the very people that you need to motivate and lead to their greatest productivity. It isn’t right, and everyone in your organization knows it. As famed management guru Peter Drucker commented, ”Watching hogs feeding at a trough is hardly a pleasant experience.”

Of course if you risked your own money and started and grew the organization yourself, others won’t care. But even here smart successful entrepreneurs may defer taking their money out until they retire or leave the organization. A man I knew led a major company he had founded and was paid no more than his most senior executive, about $100,000 a year in today’s dollars. When he sold the company the $150 million he got was his. To me that seems a much more ethical and smarter way to reap his rewards.

This problem been recognized for a long time. When Robert Townsend was president of Avis Rent a Car. He was the one who came up with the “We Try Harder” slogan and he turned things around at Avis which was probably only the number four or five car rental service when he took over, and not number two. At one board meeting, he refused to leave even after the chairman requested that he do so. His reason? “If I do you’ll raise my salary and that would be improper. I’m making a fair amount now. Raise it and you’ll be destroying everything I’m trying to build in the spirit of all workers at Avis.” Some ethical CEOs are refusing compensation for unwarranted salary increases today, and they should. It’s not only ethical; it makes sense when you want to reward your employees lavishly.

Enlightened leaders have recognized this for several thousand years. So have leaders of “Biblical proportions.” The Bible notes its importance in Numbers 16:15. When Moses’ leadership was challenged by another, he didn’t defend his compensation on the basis of his accomplishment of having successfully negotiated the Israelites release from Egypt or his successful military campaigns, or even the authority given him by God, all of which were true, but rather because he didn’t take an excessive amount for his services.

It’s pure rationalization to say that this type of excessive monetary reward acts as a motivator for higher executive performance or as a motivator to work harder for promotion for those commandos currently at the lower levels. Study after study shows that top executives in this country usually get their high compensation whether they perform well or not. And don’t think your employees are stupid. They know that organizations are structured like a pyramid, with fewer and fewer positions as one approaches the top. This means that for the vast majority, these princely monetary rewards will never be theirs. So why should they break their necks? Sure, no one held a gun to anyone’s head to get them to work for you. However, this misses the point. Does high executive compensation motivate others or de-motivate them? That, fairness and whether the reward is effective should be the question.

Characteristics of Effective Rewards

To summarize and to be effective, rewards should be:

• Timely
• Fair
• Tied to specifics
• And considered Important by the recipient

Rewards may be monetary, but this should not be the primary element.

 


THIS MONTH’S THOUGHT FOR LEADERS:
‘There must be some other stimulus, besides love for their country to make men fond of service.” – George Washington

 

Recent Linked Articles by Dr. Cohen, not Published in the Journal of Leadership Applications:

 

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