How Incentives Can Shape Culture

By John A. Haas
Management Strategies Group

Organizational “culture” is a construct that defies precise definition and measurement, yet constantly impacts your business. Executives who ignore culture or decide it’s not important miss a great opportunity to strengthen adherence to their core values.

Some Realities

• Every organization has an operating culture; a set of perceived values, norms, accepted “ways of doing things.”
• Whether clearly or vaguely defined, culture governs all employees’ behavior.
• Culture affects both external relationships (customers, vendors, strategic partners) and internal ones (communications, teamwork, “turf” conflicts).
• Operating norms may differ in different parts of the organization, creating potentially damaging “disconnects.”
• Actual behaviors are determined by what employees perceive is expected, which may differ from what senior managers intends.

Creating Strategic Incentives

Involving employees in the process of developing (or improving) and implementing incentives, in itself helps shape culture. For example:

Seek employee input about their current compensation, key performance measures and how they would like incentives to work. This helps them realize the importance of their efforts and shows their ideas are important and valued.

Communicate reasons for incentives, including: translating organizational goals to participants’ “line of sight;” identifying performance targets that define a “good job;” making results “matter;” aligning participants’ interests with the organization’s; and sharing success with those who helped achieve it.

Ask participants to propose their own incentive elements. Seeking their ideas about important goal areas for the next period, the relative importance of each, and especially ideas about appropriate target performance levels forces them to think through job responsibilities and how they can best contribute to organizational success. Final goals are set through discussion.

Encourage teamwork by assigning each team member certain common goals upon which individual compensation depends. They will determine how to coordinate and integrate their efforts so that all succeed.

Communicate about individual and team goals, to assure they are simultaneously achievable and mutually consistent.

Following these suggestions strengthens employee engagement and commitment, and helps assure that organizational goals are met and likely exceeded.

Fall 2005 -Volume 15, Number 4

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