By Steve Hunt
Virtually every company says it values career development. Yet one of the most common reasons for turnover is a lack of development opportunities.
If development is so important, why does it seem to be in such scarce supply?
One reason is many companies actually do things that discourage people from engaging in development activities.
You can tell a lot about how much a company values development by looking at the criteria used to guide compensation and promotion decisions.
- Are managers and employees rewarded for investing time in building long-term talent?
- Or, is it all about last quarter’s business results?
The following are examples of ways companies actually punish employees, managers, and human resources leaders for investing time toward development.
The best way for employees to develop is by taking on goals that require performing new job roles, adapting to new work environments, and learning new capabilities. These goals are typically harder to complete than familiar goals because they require learning new things.
Many companies do not distinguish between developmentally challenging goals and familiar goals when evaluating employee performance. All that matters is whether employees meet their targets.
As a general rule, if an employee hits 100 percent of their goals year after year, they are not setting challenging goals. Yet, employees who achieve familiar goals with little development value may appear to have stronger performance than employees who set unfamiliar and far more challenging goals.
From a short-term operational standpoint, investing in employee development is a lousy managerial strategy.
Why should a manager risk short-term targets by giving stretch job assignments to employees who have not done them before? Why take time away from daily operations to invest in employee learning?
And moreover, why encourage employees to pursue career opportunities or promotions elsewhere in the company? How does giving away talent help the manager?
The degree to which a company supports developmentally-minded managers can be assessed by evaluating whether managers who “promote people past them” are rewarded or punished.
- Are these managers celebrated as talent creators or looked down upon as people who have hit a career plateau and are now being passed by?
- Similarly, are managers rewarded for hiring and developing less experienced and less costly candidates?
- Is there any incentive for managers to save on salary costs by developing talent instead of buying it?
- Are there metrics related to talent development and retention on the scorecards used to evaluate managers?
I once asked a business leader how his company rewarded managers who developed and promoted people out of their teams. His answer was, “We don’t, we punish them by not backfilling their positions.”
Given this, it is little wonder that a lot of managers express skepticism toward the relative value of development programs.
The saying “what gets measured gets managed” is as true in HR as anywhere else. But, many of the things that are easy to measure in HR do not support investment in development programs.
For example, it is far easier to track the cost of training than to track the value created by training. As a result, more emphasis may be placed on using inexpensive development methods rather than effective ones.
HR metrics can also create conflict within the HR organization itself.One of the classic articles about workforce managements is entitled, On the folly of rewarding A, while hoping for B.
The author provides multiple examples illustrating how leaders often communicate one thing to employees while rewarding entirely different behaviors.
This article was published almost 40 years ago, but its message is just as relevant today. The negative corporate behaviors associated with inter-departmental conflict, administrative bureaucracy, and short-term thinking can be traced directly back to the financial structures used to reward employees.
I doubt financial departments intentionally create reward structures to encourage corporate silos and inefficient administrative bureaucracies. But such outcomes are often the result of building reward structures without fully thinking about how they will play out further down in the organization.
Consider the following two relatively common types of sub-optimal financial reward structures:
1. Rewarding internal compliance over customer service
Financial reward structures are often designed by people who do not actually work with customers to generate revenue for the company. As a result, reward structures often over-emphasize outcomes important to internal support functions and under-emphasize outcomes associated with customer service.
For example, a large health care organization recently implemented a record system that made the insurance claims process much easier for the internal accounting department. However, it also significantly increased the time doctors must spend entering data.
When the system was rolled out, doctors were told that their bonuses depended on entering data into the system in less than 24 hours. This requirement led to doctors seeing fewer patients each day to ensure they have time to complete the data entry. The reward structure was more focused on increasing internal process compliance than encouraging doctors to provide better quality patient care.
I strongly suspect the finance people who created this reward structure spend far more time with the accounting personnel who process claims than with the doctors who actually generate the organization’s revenue.
2. Rewarding cost savings versus revenue generation
Many financial reward structures are set at the business unit level and then cascaded down in functional silos.
For example, an Administrative Support department might get a set of financial targets focused on reducing operating costs while the Sales department received targets tied to closing new business. These targets are then cascaded down within each department such that individual administrative support employees are solely rewarded for reducing costs, while individual sales people are solely rewarded for closing new deals. Yet these two employees are expected to collaborate out in the field.
I have seen many examples of administrative support functions severely damaging sales force performance as a result of overly restrictive travel and expense policies. And I’ve seen just as many examples of wastefully extravagant expenses racked up by sales people in the name of “closing deals.”
Rather than encouraging collaboration between sales and support to achieve maximum sales with minimum expense, reward structures often create hostility between these interdependent parts of the organization.
Support says “sales doesn’t care about costs,” and based on how sales is rewarded, they are right. On the other hand, sales people’s complaints about support not caring about closing deals are equally valid.
A focus on compliance, not productivity
One sales person memorably told me that “working with my travel support group is like getting a license from the Department of Motor Vehicles. They aren’t measured based on whether they help me be more productive, they just care about complying with their department’s internal policies.”
The lesson to be learned is if you truly want different departments to collaborate with each other, then you must create alignment and interdependencies between the financial reward structures used by each department.
The goal of this paper is not to demean or decrease the critical importance of Finance, but to create awareness to how certain financial practices can significantly damage workforce productivity.
For many years, HR departments have been justly criticized for not doing enough to understand the financial side of the business. But, the same can be said for many Finance organizations in their understanding of HR.
Financial targets vs. employing people
Decisions that make sense based on financial spreadsheets can seriously undermine business performance when they are rolled out to actual people. The partnership between HR and Finance extends both ways – we should seek to learn more about each other.
Or as I like to say, the main reason we employ people is to hit financial targets. But we won’t hit financial targets if we don’t effectively manage the people we employ.
An example of this occurred in a company I was working with where the Director of Leadership Development was rewarded based on the percentage of positions filled by internal candidates while the Director of Recruiting was rewarded based on the number of external hires.
This placed the Recruiting organization in direct competition with the Development organization. Rather than cooperating to see if it made more sense to treat specific positions as opportunities to develop internal talent versus opportunities to bring fresh talent into the company, it was just a race to see who could fill them first.
Do you give lip service to the value of development?
I doubt any company intentionally creates rules and cultural norms to discourage development. These things result from a failure to think through the implications of organizational policies and leadership decisions.
Compare these examples to the methods your company uses to recognize and reward performance. Are you truly supporting people who invest in developing themselves and others, or do you merely give lip service to the value of development without actually rewarding it?
Note: This is an excerpt from Steven Hunt’s book Common Sense Talent Management: Using Strategic Human Resources to Improve Company Performance.