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A Healthy Management System

November 16, 2009

Are you sometimes perplexed why otherwise logical people exhibit seemingly irrational behavior in the workplace? Do you sometimes wonder how your employees can make it home safely at the end of the day? Considering the manner in which some decisions get made, do you ever speculate how the boss became the boss?

There are no magical answers to explain these phenomenon, but there are certain characteristics of a healthy management system that increases the incidence of rational behavior of otherwise competent adults in the workplace. Start by establishing worthwhile objectives that are obtainable and clearly understood by those that will have an impact on accomplishing them. Then Motivate, Measure and Compensate.

A management system must accomplish these three basics to effectively attract, retain, and maximize the performance of its personnel on a continuing basis. Once the objectives have been established, the system must first motivate employees to accomplish goals in a manner consistent with the overall priorities of the company. Too often businesses are activity oriented, not a goal oriented. In an activity oriented company, there is no general understanding concerning the overall priorities of the business. Even with individual projects that are currently in progress, there is often no consensus as to the objective of the activity being undertaken.

A healthy system must adequately and objectively measure the output and progress of each employee against individual objectives. Obviously without the establishment of objectives, it is impossible to measure the progress against those objectives.

A majority of employees have no written assignment of duties and responsibilities. In the absence of clearly defined responsibilities, it is impossible for an employee to know when their work is done. All too often several people are focusing on a priority need while other necessary but routine functions are left unattended. This will keep the staff in an overworked “fire fighting” mode and will be a substantial inhibitor to growth and improved performance. It will contribute to “burn out” of good employees and general dis-satisfaction.

The system should finally provide for an equitable compensation program. In all but the smallest of companies there should be an established policy or program to deal with compensation issues. Compensation issues will make employers and employees more uncomfortable than any other issues. As a result, the subject of compensation is often swept aside, dealt with only when a problem can’t be avoided any other way. The best reinforcement of corporate goals is a compensation system that rewards results and behavior that advance the company’s goals.

In a healthy management system, these issues must be brought out of the closet and dealt with in a professional and equitable manner. A rational compensation system must meet three standards. It must provide for “internal equity”, “external equity” and provide incentive.

“Internal equity” refers the fairness of compensation when comparing the contribution of individuals within the company. When employees are ranked according to their responsibilities, contributions, qualifications and longevity, there should be a meaningful correlation to their compensation.

A healthy compensation system should also be balanced in terms of “external equity”. That is, the company should be prepared to pay the market rate for the talent that it needs to employ. Compensation that is unbalance in either direction, will eventually cause problems.

A final component of a healthy compensation program is incentive. The compensation of the key employees who bear the burden for the successful operation of the company must be directly impacted by their performance and the overall results of the business.

The principle of incentive compensation always works (after all we are all capitalists), but the principle is often applied inappropriately. The impact of incentive, as one would expect, focuses the attention of people on the factors that will influence their compensation. It is imperative that those factors are the most appropriate ones for the best interests of the business.

Because you lead an otherwise rational existence, make sure that your management system encourages healthy and rational behavior on the job.

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