Which of the following are motivational practices that facilitate good strategy execution?

Organizations need a performance management system that monitors the progress of the execution and demonstrates senior management’s interest and investment in attaining the goals of the strategy. The greater the internal change required by a strategy, the more important effective incentives become. Performance management is essential for motivating staff and ensuring appropriate behavior in relation to the strategy.

The essence of strategy execution involves adapting the behavior and objectives of people. In the end, people have to perform the activities of the strategy and achieve its goals. This requires managing the execution performance of managers and employees. To do this, organizations need a performance management system that monitors the progress of the execution and demonstrates senior management’s interest and investment in attaining the goals of the strategy. The greater the internal change required by a strategy, the more important effective incentives become. Reward systems are essential for motivating staff and ensuring appropriate behavior in relation to the strategy. Organizations that excel at strategy execution place great emphasis on rewarding performance. These organizations have effective performance management systems as part of their implementation effort. Commitment to a strategy can be enhanced by realigning rewards so that they represent the intended strategy.

Induce behaviors that are supportive of the strategy. Reward systems can be used to influence employees through external means to assure that the implementation and the organization achieve their goals. Control systems aim to exert influence by identifying appropriate behavior, providing the means to monitor the behavior that is taking place, and rewarding and punishing this behavior. The aim is to induce those behaviors and the performance that are supportive of the strategy. Thorndike’s (1905) law of effect is relevant here: behavior that is reinforced tends to be repeated. Incentive systems, in combination with control systems, are essential for motivating employees and ensuring appropriate behavior in relation to the strategy.

WHY REWARD EXECUTION PERFORMANCE?

Rewarding good implementation performance and addressing poor implementation performance has the following positive influences on strategy implementation performance.

Incentives induce employees to execute the strategy. Unless compelling incentives are given, managers and employees will probably resist the proposed changes. New incentives must be created to induce organizational members to adopt the new modes and practices required by the new strategy. When organizational members believe that their performance is rewarded with a reward that is valuable to them, they become more motivated. Individuals are motivated to perform a certain task when they view the expected outcomes as valuable and attainable.

Rewarding performance motivates employees. When organizational members perform well during a strategy implementation effort, they want to be rewarded for it. Organizational members are unlikely to perform well when there is no link between performance and pay. When persons are not rewarded based on their performance they are not likely to be motivated to make an extra effort and achieve results.

Rewarding employees motivates colleagues. When organizational members see that others receive rewards for performance, they want those rewards as well. Consequently, they can become motivated to perform better as well. Conversely, organizational members are not motivated to work hard when their badly performing colleague gets the same salary.

Rewarding performance increases the self-efficacy of employees. When employees perform well and receive rewards such as compliments from management, they may be become more self-confident and more motivated to perform even more challenging assignments and tasks. This way, rewarding performance can build a sense of competence in employees that may increase their strategy execution performance.

MANY ORGANIZATIONS LACK EFFECTIVE REWARD SYSTEMS

Despite its perceived importance, many companies lack effective reward systems, especially in the public sector. In the public sector, organizational members are only rewarded with a fixed salary. The reward structure is fixed by regulations that apply to the whole government. Performance interviews are not always held and salary scales are automatically adjusted. Public organizations lack instruments to reward or punish the performance of employees. In the private sector, on the other hand, effective reward systems exist more often and it is easier to hire and fire employees. However, even in the private sector many organizations lack performance-based reward systems.

Managers are often reluctant to address underperforming employees. One reason why many organizations lack effective reward systems is the reluctance of managers to address underperforming organizational members. Managers are often reluctant to punish or give negative feedback to poor performers. Managers dread few tasks as much as disciplining employees. This is the mum effect, which refers to the reluctance of individuals to communicate undesirable messages. It is psychologically uncomfortable for the provider and unpleasant or threatening to the recipient and may create an unfavorable public image or result in confrontation. Furthermore, except for instances where the offense is severe enough to justify termination, a manager must continue to interact daily with the subordinate after the punishment has been imposed. Finally, my research suggests that managers can become even more reluctant to deliver undesirable news when the recipient is perceived to have low self-esteem and/or a low tolerance of criticism. Not all people have a high tolerance for criticism.

Few managers give feedback about employee performance. Managers can be reluctant to give negative feedback to direct reports, which can have a negative influence on implementation performance. A 2013 Society for Human Resource Management survey found that only 2 percent of managers provide ongoing feedback to their employees (Finkelstein, 2016). Many managers only give feedback to their direct reports during the annual performance review.

Employees often do not receive compliments but do receive criticism. Employees often receive no compliments when they perform well but do get criticisms when they make mistakes. This is very effective for decreasing the motivation and performance of employees. When superiors act in authoritarian and punitive ways this reduces organizational member self-efficacy. This has a very negative influence on the motivation, self-confidence, and performance of organizational members. Moreover, organizational members are likely to become afraid to make mistakes and take initiative.

Culture and feedback effectiveness. Culture has an influence on the way feedback is given and received and its effectiveness. For example, in cultures with a holistic orientation, people tend to use indirect and implicit messages and nonverbal cues to give feedback to others. In such a culture, it is important to establish and maintain harmonious relationships. Things are easily taken personally and people go to great length to avoid losing face. Therefore, considerable effort is taken to develop close relationships and to behave in ways to avoid losing face. To not to disrupt the harmony of a relationship, people invest considerable effort in developing an exchange relationship and being nonconfrontational. In addition, in cultures with a high power distance orientation, direct reports resist influence attempts by supervisors more and are less trusting of their supervisors’ feedback. Finally, in cultures with a low tolerance for ambiguity, individuals feel threatened easily by opinions and behavior different from their own.

Performance appraisal interviews are often ineffective. Performance appraisal interviews are often ineffective and are not often held within many organizations due to cultural norms. Many organizations do have such reward systems but are a façade. An example of this is an international company, which has a company-wide policy of holding performance appraisal interviews. Consequently, the local subsidiary must hold performance appraisal interviews. In this instance, everyone gets a good assessment and no one is reprimanded when performance lacks. In developing countries, implementing performance-based reward systems is often difficult because cultural norms make it uncomfortable for managers to single out their direct reports either as excellent or poor performers. For example, in Gambia a performance-based reward system was developed by the government but managers did not use the system (ibid). In holistic-oriented cultures, evaluations entail more than task behavior but also long term implications, such as the ability to ‘fit in’ (ibid).

Avoid over reliance on external control based reward systems. Many organizations have reward systems based on external control. Rewarding is done using formal systems such as dashboards and performance appraisal reviews. These systems have in common that they are based on performance assessments over which the individual has little control. Rewards are often based on goals and targets, which the employee did not set him or herself. From a social psychological perspective, such an external control view on strategy implementation collides with the individual’s natural inclination to internal control. Individuals have a natural inclination to pursue feelings of competence and self-determination (Deci, 1975, McClelland, 1975). There is clear scientific evidence that individuals desire personal control. Numerous studies have indicated that people prefer choice and control over no choice or no control. A person’s feeling of self-determination and competence is key to the experience of intrinsic motivation (Manz, 1986). Intrinsic motivation is derived from feelings of competence, self-control, and purpose (ibid).

CONSEQUENCES OF INEFFECTIVE REWARD SYSTEMS

A lack of an effective reward system can have several consequences for strategy implementation:

No financial incentive to perform well. When there is no effective reward system, there is often no financial incentive for organizational members to perform very well during an implementation effort. While financial rewards are not the most important or effective rewards, they do matter to employees.

Without feedback, employees do not know what to improve. When an organization lacks an effective reward system, organizational members get little to no feedback about their performance. When organizational members lack feedback about their performance, they do not learn from their performance making it difficult to improve upon their performance. Most persons have an internal drive to improve themselves, so when their performance is fed back to them they are likely to want to improve that performance.

Excessive external feedback creates powerlessness. When organizations use reward systems that weakens the self-determination need of employees, this increases their feelings of powerlessness (Conger and Kanungo, 1988). Excessive external feedback places external limits on the self-influence of a person. Over reliance on external controls can lead to dysfunctional employee behaviors such as ‘rigid bureaucratic behavior’ (performance of only those behaviors that are rewarded by the control system) or inputting of invalid information into management information systems (Manz, 1986: 587). Decreases in personal control resulting from over reliance on external control mechanisms can result in a variety of negative consequences for individuals and organizations, such as increased stress, withdrawal, reduced performance, depression, organizationally induced learned helplessness, lack of innovation (Greenberger and Strasser, 1986), and even sabotage (Allen and Greenberger, 1980). Clearly, such behaviors and attitudes do not facilitate the implementation effort.

HOW TO REWARD EXECUTION PERFORMANCE

The following best practices have a positive influence on strategy implementation performance.

Give feedback about performance. Performance feedback is one of the most effective methods of increasing individual and group performance. Feedback is a prompt for motivation, performance and learning. Feedback allows employees to assess their performance, learn from mistakes, see how others perceive them, improve ineffective work habits, examine alternative behavior, and increase self-knowledge. Through honest and open feedback, employees know where they stand and what they can improve about their performance.

Deal with poorly performing organizational members. Not only should well-performing individuals be rewarded but poorly performing individuals should be addressed as well. For example, when organizational members do not perform well, deal with them by having performance interviews, transferring them to another department, not giving them a raise, demoting them, or firing them.

Tailor feedback to the receiver. Not all feedback results in improved performance. The effectiveness of feedback depends on individual differences in performance, ability, and emotion (Arvey and Ivancevich, 1980). Therefore, modify feedback to fit the receiver to maintain effort and performance. However, many managers are not trained in coaching or feedback techniques.

Use informal rewards. Informal rewards such as compliments, pats on the back, a sense of pride and enthusiasm are a very effective even more so than financial rewards. Organizational members appreciate compliments, praise, and recognition. Both financial and non-financial incentives are effective, but praise is generally more effective in improving organizational member performance. By giving compliments to organizational participants when they perform well during the strategy implementation effort, management can increase their level of motivation and self-confidence. However, base praise on real work results, progress or significant efforts toward progress (Amabile and Kramer, 2007). Otherwise, it has little effect or may even result in cynicism.

Include non-financial rewards. Rewards may consist of monetary compensation such as salary and bonuses but must also include non-monetary compensation such as compliments, positive attention, praise, recognition, and good performance assessment interviews. Other non-financial rewards include when organizational participants perform well this is communicated to the whole organization and having employees of the month and year. Non-financial rewards are especially advantageous in organizations, which lack the means to reward performance with extra salary or bonuses, such as in the public and third sector. Under such circumstances, rewarding organizational members with praise and recognition may be the only way to reward or motivate persons.

Use collective rewards. The use of collective rewards (such as profit sharing or bonuses with which an organization or a department is rewarded for its collective performance)has a positive influence on strategy implementation performance. Group incentive schemes such as profit sharing, gain sharing, and employee ownership plans can be used to align the objectives of a team to the organization.

Collective rewards promote cooperation. Collective rewards promote cooperation among organizational members as opposed to individual rewards, which may promote competition among organizational members. When organizational members are partially rewarded for their collective performance, they have more incentive to make their department and the organization perform better. When only individual incentives are used, a well performing individual does not care whether his colleagues, the department, or the organization performs insufficiently. By implementing a collective reward system, the aim is that well performing individuals help underperforming colleagues to perform better. The aim is to convey that an organization is an interdependent system – linking individual performance to organizational performance.

Collective rewards increase motivation and commitment. Collective rewards can give organizational members the feeling that they partly own the company that increases their commitment to the organization. Organizational members may feel that they are not working to increase profits only shared among management and shareholders. This tends to increase motivation to perform well and their commitment to the organization and thus its strategy and subsequently its execution.

THE STRATEGY EXECUTION SERIES

This article is the 22th part in a 24-part series on strategy execution. This series is based on my PhD thesis on Strategy Execution. My previous posts in this series can be found on my linkedIn profile or on my personal website arnoudvandermaas.com/blog.

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