When Worker Morale Suffers
TEC Worldwide is an international organization of more than 7,000 business owners, company presidents and chief executives. TEC members meet in small peer groups to share their business experiences and help one another solve problems. The following questions and answers are based on discussions at recent TEC meetings in Southern California.
Question: Last year, I spent a lot of money on “improvements” in my company but our sales were disappointing. At the end of the year, I did not have the money to give out bonuses as I had in the past. Now I seem to have a lot of unhappy people. Any suggestions for boosting morale?
Answer: At first glance, employee morale may seem like a straightforward issue. In reality, morale problems always represent symptoms of deeper issues.
Before taking action, make sure you have identified the real issue. A good place to start, said Lou Kravitz, president of Louis Kravitz & Associates in Encino, is by determining whether you have a morale problem or just the usual grumbling.
Do you have objective data that show employee morale has deteriorated? If so, with what benchmark are you comparing the data? What seems like serious discontent may just be temporary disappointment because people (and the company) didn’t do as well as last year. There’s no point in investing time and resources in a problem that doesn’t really exist.
If your morale problems are real, said Don Riddell, chief executive of Options for Youth in Pasadena, the root cause may lie in the nature of your bonus plan. Are your bonuses linked to specific performance criteria or do you hand them out on a discretionary basis?
When given out routinely, employees often come to view discretionary bonuses as an entitlement rather than a reward. When you take away a perceived entitlement, morale will suffer.
If your bonus system is performance-based, the problem may stem from lack of communication. Do your employees have access to the profit and loss statement and other financial information?
Do they understand how bonuses are tied to the company’s performance? If so, what are their expectations for rewards based on how well the company is doing?
More important, said Quentin Leef, president of Chatsworth firm Kerning Data Systems, did they know that sales had taken a downturn or were they surprised?
John Rashap, president of DocuSource in Chatsworth, raises the issue of buy-in. Did your people understand and buy into the need for the improvements? Were the budgets realistic and the sales forecasts accurate?
If you didn’t communicate these improvements and/or your employees didn’t support your decision to invest in them, they may have reason to grumble about the outcome.
In a worst-case scenario, said Bill Lockwood, chief executive of Platt Colleges in La Canada, these issues can come together to create a serious leadership credibility gap.
Regardless of what caused the morale problem, your people need to believe that you have the situation under control. Do you (and your management team) know why sales took a nose dive? Have you communicated those reasons to your staff? Do you have a plan to turn things around?
Missing a bonus may cause temporary grousing. But if people have begun to doubt your ability to get the company back on track, you have a serious problem on your hands. Given this input, what specific actions might you take?
First, consider conducting an employee survey to determine whether you have a real morale problem. In particular, you might want to focus on employees’ attitudes toward the bonus program and their level of confidence in the management team.
Next, take a hard look at your bonus plan and what you hope to accomplish with it.
Discretionary bonuses may boost your ego, but they do nothing to improve performance. Once they reach the point of becoming an entitlement, they can have a de-motivating effect.
The best bonus plans tie specific incentives to company and individual performance. People know how much they can earn and what they have to do to merit it. Plus, they get regular feedback, so they know where they stand.
Finally, stop chasing a quick fix and start looking at long-term solutions. Work on improving communication at all levels of the organization, making sure that communication goes both ways.
Make a commitment to share more information with your staff. Teach them how to read financial statements. Show them how each job affects the bottom line. Set clear, realistic goals. Above all, make sure there are no surprises at the end of the year.
Missing performance goals will certainly cause short-term disappointment. But poorly designed compensation plans, a systemic lack of communication and a perceived lack of leadership can lead to long-term morale problems.
Your task is to decide which of these prognoses fits your company and take the appropriate action.
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If there is a business issue you would like addressed in this column, contact TEC at (800) 274-2367, Ext. 3177. To learn more about TEC, visit https://www.teconline.com.
