Recently I was talking to a CFO about the Bonus Plan in his organization and to which extent it is increasing employee engagement. In this organization, the bonus plan was mainly based on the companies’ financials. When certain financial targets are being met, there would be a bonus payment.
It appeared that the bonus plan, although bonuses are being paid most years, was not succeeding in increasing engagement.
The employees felt not involved in the companies overall financial goals and also they didn’t feel they could influence the numbers. This led to disengaged employees and even complaints, which really is a shame and a missed opportunity. After all, the bonus plan was put in place to increase engagement.
We had a consult about how this particular company could change this and create real engagement with the results of the company. Here are a few of the outcomes.
Are the employees able to influence the financials?
In the end, all employees contribute to the organizational goals and results, although some of them more direct than others. When employees feel like they cannot influence the results it just means that they are not aware of how they are or should be influencing them. This might especially be the case with indirect employees or staff members who are far away from the primary moneymaking processes in the organization, but nevertheless, they do (should!) add value to those processes.
How to get your employees to understand how they contribute
It should be very clear to both management and to employees themselves that they are supporting the core processes and how they do this. This is their core role, they are hired and being paid to make something happen, to create the conditions in order to contribute to the companies results. Give sufficient information on HOW people actually influence the financials and WHAT kind of behavior you would expect from them in order to reach certain targets or goals.
A secretary supporting a client facing team should be aware that team needs to be productive as they can, and that it is her job to make sure they are. And an HR Manager might feel that he cannot influence the financials, but he needs to be aware that he is responsible for balancing employee benefits to be competitive but also contributes to the overall financial health of the company, and that attracting and retaining talents is also a financial critical process.
Goal setting and Financial Targets
Most organizations have clear goals that they want to realize over the course of the next 12 months or so. It is important to make it clear how these goals contribute to the expected financial results. This way, it becomes very clear what the influence is and it will increase ownership and engagement.
Financial transparency to increase employee engagement
To be honest, one of the main reasons the employees did not feel engaged within this particular company is that there was a very low transparency about the financials. The CFO held back a lot and shared the bonus percentages, but parts of the base of the calculations were not shared with the employees.
The engagement does not come from receiving money in the bank, but from having a good understanding of the impact people have made and how it relates to this bonus. This will create a feeling of being a team and give a feeling of “we earned it”.
So to really increase engagement, it is important to be transparent and communicate the financial progress and results with your employees on a regular base. Also, it is important to include all employees, even the ones who are not directly influencing the financial results.
Increase financials knowledge for everybody in the team
What does EBITDA stand for? What is the difference between net income and profit? To increase engagement it is important that your team understands what the metrics are that you use in your financials and based on what metrics the bonuses will be paid out.
Employee engagement is depending on many different aspects and this is a good example of how a tool that is supposed to increase engagement was actually counterproductive. If you want to have a chat with us about how you can increase your employee engagement by getting them more involved in the financial part of the business, please book a discovery call with us.