Performance-based rewards, line-of-sight foster ownership behaviour in staff

Do employees in your organization understand how they make a difference in helping the organization to succeed? Are they rewarded for their contributions? Are they involved in decision-making?

To foster an environment where employees think and act like owners, these questions should be answered with a resounding “Yes.”

There are three key factors that help shape employee ownership behaviour:
•rewards for performance;
•line of sight; and
•involvement.

Rewards for performance

This factor considers the extent to which an organization links results and rewards.

Are employees rewarded for contributing to the success of the business, or just for “showing up?” Do they have an opportunity to own a real stake in the business?

The stronger the link between rewards and individual and corporate performance, the more effective a pay plan will be in focusing employees on business priorities and fostering ownership behaviour.

To that end, incentive plans can be an effective mechanism for creating these important links between performance and rewards.

For example, giving employees a three-per-cent cost-of-living increase across the board may help boost morale, but it doesn’t provide a direct link to individual effort. Performance-based pay provides this link. An employee stock option plan takes this to an even higher level of commitment by rewarding ownership behaviour.

Line of sight

This factor considers the extent to which an employee can relate daily work to the achievement of the organization’s business and financial goals. When employees understand and see the link between their daily work and their impact on the bottom line — be it direct or indirect — they are more motivated to change their behaviour.

Towers Perrin’s recent Workplace Index Study found that 91 per cent of employees who said they understood how to make a difference in their company’s business results reported being motivated to help the company succeed. In contrast, only 23 per cent said they felt motivated when they didn’t see how they made a difference to the organization’s success.

The study also found that 84 per cent of employees who said they understood the organization’s business strategy were also more likely to feel motivated to help the company succeed.

From an organizational perspective, there are stages in the creation of line of sight for employees. It begins with helping employees understand the organization and its overall goals and priorities. From there, the organization can help employees understand how they can contribute to the success of the business. Then, the task becomes helping employees translate their understanding into actions that can yield important business results. At the highest level of engagement, employees take a personal interest in helping the organization to succeed, and demonstrate ownership behaviours.

Involvement

An important factor in pay for performance is the degree to which employees are included in decision-making processes. Are they occasionally asked for input or feedback? Or are they empowered and challenged to make a difference?

The greater an employee’s level of involvement in the decision-making process, the greater the sense of ownership for the outcomes of such decisions. This, in turn, helps to foster greater levels of ownership behaviour.

It is important to note that all three factors — performance-based rewards, line of sight and involvement — influence an employee’s decision on whether or not to “fully engage” on the job. While each factor is important on its own, leveraging all three is the most powerful way to encourage ownership behaviour.

Vivian Dell’Agnese is a compensation consultant in Towers Perrin’s Toronto office. She can be reached at (416) 960-2846.

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