Irish Water Bonus

Irish Water paid bonuses to their employees even if they had a ’Needs Improvement’ rating on their performance Review. You might ask what is so unusual about paying bonuses in a company, don’t all companies do this and isn’t this the way to stimulate performance in a company and from what we have seen of Irish Water so far their performance definitely merits improvements.

Paying bonuses to employees for their performance is counterproductive and doesn’t do anything to increase the performance of employees, the opposite is true.

Repeated research by highly regarded institutes over the last 30 years has proven without doubt that paying bonuses for performance doesn’t work and is counterproductive. Keep in mind the banking crisis; the collapse of a complete sector which paid itself the highest bonuses. If bonuses worked the banking sector should be thriving! 

Any self respecting HR practitioner knows this and would be very careful regarding implementing a bonus culture in a new company. That is the surprising thing about Irish Water, as it is a new company it has all the opportunities to establish a new culture and implement policies which would help it perform, yet Irish Water immediately returned to the failed old bonus culture. It tells me that top management is not focussed on creating a new efficient organisation based on new proven scientific methods but are very focussed on keeping things as they are. This is not very convincing for the executive of a newly formed company assigned with such an important task.

Dan Pink in his book: ‘Drive, the Surprising Truth About What Motivates Us’ reviews the new motivational theories developed over the last 30 years. He concludes that when it comes to motivation there is a gap between what science knows and what business does. Our current business operating system – which is built around external, carrot and stick motivators (performance bonuses) doesn’t work. Science has shown us that the new motivational approach which works has three essential elements 1) Autonomy, the desire to direct our own lives. 2) Mastery – the urge to get better and better at something that matters and 3) Purpose – the yearning to do what we do in the service of something larger than ourselves.

Up to the end of the last century motivation and bonuses were built around external rewards (performance bonuses) and punishments. That worked fine for routine 20^th century tasks. But in the twenty first century this old system is proving to be incompatible with how we organise what we do, how we think about what we do, and how we do what we do. When the carrot and stick approach used for more complicated management roles strange things begin to happen. 

Traditional ‘if-then’ rewards can give us less than what we want. They can extinguish intrinsic motivation, diminish performance, crush creativity and crowd out good behaviour. They can also give us more of what we don’t want; they encourage unethical behaviour, create addictions and foster short term thinking. And that is exactly what is happening at Irish Water at the moment.

The Carrot and Stick approach isn’t all bad. It can be effective for rule-based routine tasks, because there is little intrinsic motivation to undermine and not much creativity to crush. However, this doesn’t apply when you are setting up a new organisation. Then creativity, ethical behaviour and performance are very much in demand.

Modern motivational theory centres on three important elements for employees of a company: Autonomy, Mastery and Purpose. This is what Irish Water should have been focussing on instead of a quick performance bonus which is counterproductive.

If you want to see a youtube video from Dan Pink about this have a look below.

https://www.youtube.com/watch?v=u6XAPnuFjJc

The question of a living wage?

There is a lot of talk about raising the minimum wage in Ireland and bringing it up to a living wage of €11.45. Currently the minimum wage in Ireland is €8.65 and this is the fourth highest minimum wage in the European Union only lower than Luxemburg, France and Belgium and at a higher rate than Germany and the United Kingdom, the economic engine of the EU. The living wage of €11.45 would be higher than the minimum wages in Luxemburg, France and Belgium.

Unions maintain that the minimum wage is too low to make a decent living in Ireland and that is probably true and they propose to increase the minimum age and introduce a living wage which would make it possible for people to live from. A noble thought. 

Furthermore they say an increase of the minimum wage would boost the economy! However the socialist government in France increased their minimum wage to €9.43 in 2012 and the French economy is still in the doldrums.

Mark Fielding of the small and medium employers’ organisation ISME says that employers can’t afford to increase the minimum wage and that if there would be any increase this would have a detrimental effect on the Irish economy. Mark is right a further increase of the minimum wage would put many small and medium size companies to the pin of their collar and would stop any growth in employment. This is practical realism of ISME and Mark Fielding.

Now get me right I am not suggesting to decrease the minimum wage either I am making the point that an increase is now not opportune.

Is there a third option which could square these opposing views? In my opinion there is but it would mean a different approach to industrial relations than we have had in Ireland up to now. Up to now the focus on industrial relations has been very much on wage increases and very little else. Yes there was a broader approach in National Wage Program Towards 2016 however at the first difficulties the other ideas were quickly dropped and the focus was back on wage increases. Wage increase is a topic which is easy to sell for the unions. It is easily understood by their membership that is why it has been so popular.

However establishing the highest minimum wage in the EU, as a struggling economy is in my opinion not a smart move. The case is that with one of the highest minimum wages in the EU, Ireland is not underpaying their employees but the cost of living is too high.

To give a recent example in the last year the charge for peoples renting houses as gone up considerably and the same for house prices. It has increased in such a way that it puts an enormous pressure on the wages of people working with a result they are demanding higher salaries. In a modern society this topic needs to be resolved if an economy wants to thrive for all. Rent controls need to be introduced and social housing needs to be developed. To let the market organise this itself is an out of date approach in a modern European social democracy. Our recent economic problems proved that this approach doesn’t work in the 21^st century.

The government and the social partners need to address this issue and other issues like affordable health care. A broader methodology to industrial relations than just a focus on wage increases would benefit the economy, employees and employers.

Government, unions and employers should take action on this and not drive wage cost up in order to get everybody a Living Wage of €11.45 while still nobody can afford to rent or have decent health care.  

How to Turn Strategy into Great Performance

You have devised a great strategy for your company and all the indicators show that you should get a big return on investment. Yet when the year comes to end the results have brought not what the strategy suggested. What has happened? You spent so much time in getting the strategy right and now there is little to show for it. Unfortunately, this scenario is more common then you would think.

Companies only realise about 60% of their strategies potential because of defects and breakdowns in planning and execution. If you review the most common causes for the failure of strategic plans the findings are revealing and troubling.

Research into the strategy to performance gap published by the Harvard Business Review shows that virtually all companies surveyed struggled to produce the financial performance forecast in their long-range plans. Furthermore, the processes they used to develop plans and monitor performance make it difficult to determine whether the strategy to performance gap stems from poor planning, poor execution, both or neither. The biggest problems are: -

v  Companies rarely track performance against long-term plans – the research shows that less than 15% of companies compare the business results with the performance forecast, drill down to analyse why the performance was not achieved and take this information into account when making new plans.

v  Multiyear results rarely meet projections – This is demonstrated by a dynamic common to many companies. The 4 – year plan projects modest performance for the first year and a high rate of performance thereafter. Management meet its modest target for the first year and is recommended and prepares a new plan with a modest growth for the first year and a high rate of performance thereafter. The process is continued over the next years with only modest results over the projected years.

v  A lot of value is lost in translation – Given the poor quality of financial forecast in most strategic plans it is probably not surprising that most companies fail to realise the strategic potential value. What emerges from the research is sequence of events that goes something like this: strategies are approved but poorly communicated. This makes the translation of strategy into specific actions and resource plans all but impossible. The lower end of the organisation doesn’t know what they need to do and when they need to do it and as result the expected results don’t materialise. If no one is held responsible for the shortfall the cycle of under performance gets repeated over and over again.

v  Performance bottlenecks are frequently invisible to top management – When plans are realistic and performance falls short, executives have few early warning signals. They have often no way of early detection whether actions were carried out as planned, resources were deployed on schedule, competitors responded as anticipated etc.  As result it is impossible to take corrective action on time.

v  The established gap fosters a culture of under performance – If the strategy underperformance becomes the norm over the years’ then commitment cease to be binding promises with real consequences. The organisation becomes less self – critical and less honest in its shortcomings. Consequently it loses its capacity to perform.

However, there is a way out as a number of high performance companies have dealt with above described problems. They have created clear links between planning and execution and raising the standards of both of them. There are seven rules to follow and these are: -

1. Keep it simple, make it concrete – Ensure that all staff member know the strategy and how it affects their day to day performance. Make certain that all employees know what they have to have delivered at the end of the year.

2. Debate assumptions not forecast – Strategies are often based on assumptions and to make them come true staff need to know what you are thinking in order to engage in the process. When they understand the fundamentals and performance drivers they understand what exactly is required and understand better how to deliver on the performance.

3. Use a rigorous framework, speak a common language – The specific framework a company uses to ground its strategic plans isn’t that important. What is critical is that the framework establishes a common language for dialogue between the management and employees one that strategy, marketing, finance and operations all understand and use!

4. Discuss resource deployment early – Companies can create more realistic forecast and more executable plans if they discuss up front the level and timing of critical resource deployments.

5. Clearly identify priorities – To deliver any strategy successfully managers must make thousands of tactical decisions and put them into action. Companies should agree on priorities, communicate relentlessly and hold managers accountable for executing against their commitments.

6. Continuously monitor performance – Continuous monitoring of performance is particularly important and proactively monitoring the primary drivers of performance. Putting the Key Performance Indicators on the agenda of every management meeting should ensure that all keep the eye on the ball.

7. Reward and develop execution capabilities – No list can be complete without a reminder that companies have to motivate and develop their staff, as at the end of the day no process can be any better than the people who have to make it work. This also includes development of staff members who have made it work.

The prize of closing the strategy to performance gap is huge – an increase of performance from 60% to 100%. However, the true benefit for companies who create tight links between their strategy, plans and performance is that will they experience a multiplier effect, as a result of their efforts they are willing and able to take on stretch commitments that inspire and transform companies.

Dismissal

“Could you come in now direct to see us?” That is a question which I am frequently asked by managers, who are not sure what to do in the case of a dismissal and are wise enough to ask for assistance. The legislation regarding a dismissal can be tricky and difficult enough for any individual and it is more difficult when you are agitated when something has gone wrong and you are tempted to make a decision on the spur of the moment. In those cases it is always sound to get an outsider in who can look at the facts coldly and make a fair assessment about what needs to be done.

In my experience managers do not enjoy reprimanding or dismissing any of their employees lightly. The opposite is true. In most cases managers will avoid giving feedback regarding employees’ performance at all cost. They will give the employee chance after chance in the hope the problem will improve and will go away. In most cases they do improve, the employee somehow gets the message and cops on, get his act together. In other cases this doesn’t happen and then at a certain point after giving him the benefit of the doubt several times, the manager has enough and wants to end the employment there and then.

Dismissing someone in Ireland isn’t the most difficult thing to do. There are other countries where such procedures are much more complicated. However, there are certain strict rules one has to follow and I will give you now some general guidelines how to act (however, by no means complete as one could write several books on this subject). First of all employees must be issued with a copy of the company’s disciplinary procedure within 28 days of commencement of employment, failing to so could jeopardise any dismissal case.

Employees can be fairly dismissed for the following reasons: Conduct, Capability and Competence and Redundancy. In cases where the conduct, capability and competence of an employee aren’t up to the required standards the first thing a manager or supervisor needs to do is to give a verbal warning. While giving a warning you must inform the employee regarding the departure of required standards, what action of improvement is required, when will the matter be reviewed again, what time limit is on the warning and what action will be taken if the improvement is not made. As you probably have to prove as a company that the dismissal was fair you need to prove that you gave the warning by putting it in writing as well and preferably you give the warning in the presence of a fellow manager. If the agreed improvements do not take place then you should give a written warning. Again you must inform the employee regarding the departure of required standards, what action of improvement is required, when will the matter be reviewed again, what time limit is on the warning and what action will be taken if the improvement is not made. Again give the written warning in the presence of another manager, as you might have to refute any allegations of unfair behaviour made against you at a later stage.

If the necessary improvements do not materialise or other misdemeanours occur during the time limit of the warning, then the Final Written Warning comes into play which is given again in the presence of a fellow manager. You need to explain again what is required from the employee and how long the warning stands.

If the necessary improvements do not come about or other wrongdoings happen during the time limit then a disciplinary meeting, as in previous warnings, needs to be conducted in which natural justice has to take place, this means that: -

• The employee must be presented with the case against him / her;
• The employee must be allowed to be represented; 
• The employee must be permitted and allowed to state their case
• The employer must hear and be seen to hear the case being made
• The employer must only form judgement after having considered all the facts disclosed.

In coming to a final decision the manager must reflect that the sanction must be appropriate to the charge, if there is a dismissal this must be not be seen as excessive, the manager must have approached the hearings fairly and objectively.

Its sounds like an impossibility that any employee will let it come to three warnings and still hasn’t got the message, however, it has happened and will happen again tomorrow, so be prepared! 

As the employee in a dismissal case is probably going through one their worst moments in life, be always polite and respectful to the employee. This is helpful for both parties.