122. The higher the bonus, the worse the results

Dear Erik

That would be nice. You set up an open organization with clear goals and known to everyone and hopefully within a few years we will have a market capitalization of more than one billion! I’ll get started right away and let you know in two years.

But seriously, with regard to the founder of Tesla, I heard that he was one of the owners of PayPal, and he and the other partners sold the company for a huge amount. Another partner at PayPal started LinkedIn. It could all be due to openness and clear goals, but in my opinion it is secondary to a whole range of exceptional entrepreneurial qualities which these people undoubtedly possess.

But you got me thinking and it struck me that our CEO with her team in Slovakia achieves exceptional performance and one of the biggest changes she introduced are very clear KPIs (Key Performance Indicators) which are clear to all and allow everyone to see how their colleagues are doing. Very clear weekly, monthly and yearly goals expressed in turnover, the number of candidates to be placed per month, the number of interviews with candidates, the number of candidates introduced to clients and several more indicators. The financial bonuses are also very clearly defined and everyone can calculate his own bonus. In addition, she sends monthly statements of all realized KPIs, with a congratulation to the best-performing peers. She and her team have broken one record after another. In Romania, we have also achieved extremely good results and our goals are very clearly formulated and known by everyone.

Furthermore, Erik, you have not just got me thinking, but you have also incited me to action. I have asked around forty of my colleagues for their ideas about the vision and mission of our company over the short and long term, how Lugera should distinguish itself, or already does, to clients, colleagues and candidates. We will process the answers and create a presentation, along with our ideas, and present this to everyone and publish it on our website so that all stakeholders understand what we do, why we do it and where we are going.

With regard to the amount of financial bonuses. I read a very remarkable study about this and the conclusion was that high bonuses have an adverse effect on the performance of the majority of employees surveyed. The conclusion was that low bonuses work much better than high bonuses. Bonuses that can double people’s salaries are mostly counterproductive. What is really motivating and performance enhancing were intangibles such as recognition, satisfaction with work and colleagues and having clear and achievable goals.

Finally, I would like to ask how do you apply the wisdom of all those American management books? How much of it is really useful? What are the best books for you? I must confess I have only come across a few which really helped me.

Best regards,

Gerard