Updated: Aug 14
Who achieves results in an agile environment? Probably more often an entire team or project than any individual. Here are 5 easy steps to make your current bonus and performance system more team and result-oriented. We can help you with the details and the implementation.
Traditional Bonus & Performance Systems
Companies still often pay yearly bonuses in the first quarter based on mainly three components:
Team / Project Performance
Company & Team Performance can be used as a bonus or salary increase factor in agile and OKR driven organization, however Individual Performance is often biased and perceived as unfair as it depends solely on your personal relationship with your line manager. Especially in companies where the staff is working on different projects or cross-functional squads, the responsibility of a single manager to evaluate an employee does not make sense. Furthermore results are often achieved by teams n complex environments rather than individuals.
Get rid of the 1:1 performance feedback
In order to make the performance feedback more fair and less biased, we have successfully implemented Peer-to-Peer or 360 Feedback to replace the individual manager evaluation. While these methods need training for team members and leaders on how to give feedback, they assure that everybody working with a certain employee has a voice in evaluating his or her performance. By keeping the Company and Team Performance as 2/3 or even higher indicator and the feedback on 1/3, there is also a low risk in gaming the overall bonus with peers. A further advantage is that feedback can be given event and result related rather than just on fixed half-yearly meetings.
Transform the individual measurement into cultural fit
If your companies does generate most achievements in teams (e.g. projects, sprints, operational teams, etc.), the individual is mainly working on actions and tasks to complete. We have to ask ourselves if we want to give bonuses and rewards to simple task completion or rather to the impact this tasks have. This is a crucial part of an OKR implementation that we incentivize our staff on results rather than just work.
For further information on OKRs and result creation have a look at our blogs:
As we already measure company & team performance in traditional bonus evaluations, we could shift the third component of performance measurement from individual performance to "Cultural Fit". Most companies do have 3-5 cultural values defined, but do not actively work with these dimension. Our clients successfully implemented cultural fit on a 1-3 or 1-5 rating scale (ideally by Peer-to-Peer Feedback) with explanations what each rating means. It is based on the understanding that functional teams or cultural aligned team members achieve more together.
We could support you to develop and implement these cultural fit ratings for your organization.
Add career, skill and training development
Lifelong Learning is not just a catch phrase but something which is definitely achievable and measurable. Engaged employees want to learn more in their domain or in further topics and therefore the organizations should foster this drive for knowledge and skills.
Besides Company & Team Performance and Cultural Fit, we could also add learning, skill or career achievements to the performance review. It is easy to set-up goals at the beginning of the performance cycle and measure if they were achieved. These goals like PMP/ Agile certifications, Tech knowledge, Soft Skills etc. and can be directly supported by the organization.
Change to split bonuses and mini-rewards
The main issue of yearly bonuses is the detachment to the time of the achievement and often leads to a high turnover trigger point during the year. Employees want to be motivated and recognised more than just once a year and would like to achieve awards when the actual achievement happens.
As a first steps, some of our clients changed the yearly bonus system, to half-yearly with split bonus payouts in Q3 and Q1, based on 6 months performance. In an OKR cycle, we could also implement quarterly bonuses.
Beside these more regular payments, we highly recommend Mini Rewards at any given time based on team or individual achievements. These rewards could be monetary or product / voucher based on leader, team or P2P feedback. We could support you to find the right method and system for these rewards.
Overall, bonuses and rewards should not only be a yearly monetary incentive but also motivational and engaging for your employees. Therefore we advise to enhance your current bonus & performance system with the five steps above or change it a more team, cultural and learning based system.
For more information on how to adapt your Bonus & Performance System to more agile environments please contact us here or on email@example.com
This blog was written by Carsten Ley, Entrepreneur, Enabler & Project Lead in Customer Experience, Project & Business Transformation leading large scale project implementations in Retail, E-commerce, Banking, Consulting & Experience Management for companies like Deloitte Germany, VW Mexico, Rolls-Royce UK, Lazada Vietnam and H&M South East Asia. He founded 2018 Asia PMO, a consulting firm focussing on getting clients fast and efficient into implementation of company objectives, customer & employee experience improvements to foster a result- and team-oriented environment.