Do Steady Raises Cause an Entitlement Mentality?

Most companies conduct their employee performance reviews once a year. At my company, Patriot Software, we prefer to do reviews every six months.

This shorter review cycle can be tough on our managers, but it's better for each individual worker. A shorter review cycle allows us to stay in touch with our employees' needs, helps with employee retention, and ensures performance improvement initiatives don't get lost in the shuffle.

I am a firm believer in this statement: If it's within your power to give, give! Thus, I have been guilty of giving out raises and cash bonuses after reviews are conducted, even in economic times when most business owners did not.

An unfortunate side effect of my generosity, however, is there have been occasions when an employee expected a raise or bonus every six months due to an entitlement mentality, and not as the logical result of hard work or the business landscape.

The entitlement mentality can be a real productivity killer. Take a look at what entitlement born from unionization has done to some companies that were once nimble and competitive. Even in a situation where performance is evaluated in six-month cycles, employees can "coast" under the assumption that they need not push themselves because a raise or bonus is a standard occurrence.

Discouraging an Entitlement Mindset

To avoid this entitlement mindset, I try to educate my employees about the reasons behind review cycle bonuses and raises. Transparency not only keeps clear why we do reviews, but also how the business is going, and the role employees play in its success.

The following is a real-world example of the entitlement mentality at work, pulled straight from my company newsletter, The Grapevine:

We are on a 6-month performance review cycle, but I'm just going to level with you. A few (very few) raises were given out this time, but only in very specific/unique situations. And in some other cases, we gave one-time cash bonuses instead of raises.

However, not everyone received a bonus or a raise…especially the folks who are commissioned on their sales. We have never done performance reviews like this before, but here's why we did it. (Sorry in advance, but I'm going to use Washington as my analogy.)

Unlike government bureaucrats who get a paycheck no matter how well they perform, we have to earn every dollar that we receive. We have to live within our means. We cannot spend what we don't have. We can't "print up" our own money. And, whatever we borrow, we have to pay back. (You get the point.)

So, we decided to take some of the cash that we have already earned and give out some bonuses instead of giving raises.

Receiving a bonus or raise in this economic environment is very unusual, but we're doing it anyway. A bonus is awesome (even if it's small). A raise is even more awesome. And, I wish I could do more. But right now, I'm trying to "balance it all" with where our companies are. And let's not forget, there are some folks sitting near you who received neither at this point.

So, I'm hopeful that we (as a group of companies) can increase our sales enough (despite all of the market forces against us), so that every person in our companies can continue to improve their financial situation as we press forward.

Well Mike, why then did some people get a raise or bonus and not others? Without getting into tons of detail, I used two major factors in the decision-making process: The person's performance review score and the "success" of the company or project they're working on.

Time for another Mike-ism: I don't want my kids to get a trophy for merely participating in sports. If their team was better than the other team, and they win; give them a trophy. But if their team loses, no trophy should be awarded, because no trophy was earned.

Showing up isn't enough. Winning isn't everything, but it does matter.

In our businesses, for example, winning matters a lot, because if we don't win, we can't make payroll. At performance review time, we took into account whether or not the companies and/or projects were winning, and you will see more of this in the future. Handing out "participation trophies" may work for government bureaucrats, but it's wrong. Being paid for performance is what should happen.

And I shouldn't need to mention this, but, whether or not you received a bonus, a raise, or nothing at this time, it is nobody's business but your own. This is to remain confidential, and it should not be discussed with your peers. Thanks in advance on that!

The Power of Open Communication

You've probably noticed that my candor is very natural. Some might even say it's a little too natural. Some HR specialists suggest that I should avoid opening myself up for questions about the inner workings connected to how my business is scoring points. Maybe you're wondering that yourself.

I disagree. I'm invested in the day-to-day of my employees. They know my attitude because they have access to me, and, even more importantly, they are welcome to come talk to me about their raise and bonus concerns. Straight talk only works when your people know they can trust you for straight answers to tough questions.

The bottom line here is, openly communicate with your employees. What "open communication" looks and sounds like where you are may be very different from where I am, but communication is vital to stamping out the entitlement mentality.

The post Do Steady Raises Cause an Entitlement Mentality? appeared first on AllBusiness.com

The post Do Steady Raises Cause an Entitlement Mentality? appeared first on AllBusiness.com.