Funnel of Love

Ah, the sounds of the season. Year-end stress around reporting, employee documentation and payroll. Isn’t it a lovely din?

In many organizations, a portion of the stress is found in the characterization funnel regarding worth. And before you conjure up beer funnel images of your college bravado, a characterization funnel is quite different. It’s the forced subjective employee personality and effort review that management creates through calendar-based compensation incentives. During this time of year, bonuses and raises may be offered and require managers to determine what and how much.

Of course, if you ask most organizational leaders, they may share the objective-based criteria used in offering those bonuses. They will regale you with tales as to how much effort went into developing these performance-based metrics and deciding upon which areas to measure. It’s a beautiful tale of meetings and emails validating some sort of “process” mechanic. But truth be told, much of that gathered data is then filtered through the characterization funnel, and its veracity is tarnished.

Managers don’t want to end the year by demotivating hard-working team members by crushing their hopes for a certain amount of bonus, or even a bonus at all. “Happy Holidays, Fred. I know you’ve increased productivity by 15%, but to qualify for a bonus, you had to have increased it by 23%. So sorry, but thanks for trying.” Really? Who wants to tell someone that? Usually not the supervisor.

Instead, we tweak the results. “While it may be true that productivity was measured at a 15% increase, we have to give credit to Fred because he lost two employees during the peak season. He really stepped up. I think he should get the bonus in light of that.” Have you been in the room for these conversations? Yes. Yes, you have. So, what’s the answer?

1. Know what you want to truly measure and why: Stop picking arbitrary metrics. 30% increase…based on what? If there’s never been a history of anyone increasing by 30% and there are no substantive changes to process or materials/service, then why is that a reasonable performance goal? Have valid and reliable reasons for the measurement selected.

• Spread it out: Instead of having the one time of year to validate someone’s contribution, spread out the incentive opportunities quarterly, monthly, etc. The funnel happens because it’s a rush of employees all at once. Within this, bias will occur. Oh, he’s trying, she’s had some setbacks, etc. Excuses come in that invalidate the criteria that was setup. And lest you think this is symptomatic of a certain size or type of industry, it happens across the board. People dealing with people when the pressure of livelihoods, the time of year and wanting to keep peace all collide lead to subjective decision-making and bias pitfalls.

• Be incremental: Perhaps an all or nothing approach isn’t the best option. Instead of one number to hit, is there value in stepped improvement? There is. Moving to a 10% increase in productivity, while pushing towards a 30% overall, is a win. Maybe assigning a portion of incentive-based pay for such a milestone is appropriate. Everything wouldn’t have to wait for the end of year funnel. 

Think through these initial steps and challenge the reliability of the current year-end process. Fight the characterization funnel and move beyond old school thinking. There are 12 months in a year. 12. Share the love throughout the year.