Insights on Excellence | "Insights on Excellence" Archive

Judging the value of pork in business

by Stephen Hawley Martin
for Virginia Business
January 10, 2007

No matter which side of the political spectrum they lean toward, most business people would agree that Congress hands out bushels of money -- sometimes for good reasons, and other times not -- and it certainly seems the public hardly ever gets an accounting of the effectiveness of that spending. Unfortunately, Congress doesn't have to make a profit to stay in business.

Imagine if a business was run like Congress. We could all step back and watch it get sucked down a gigantic black hole.

But there is one area where executives often behave like congressmen. Compensation and benefit programs are rarely evaluated for effectiveness. I recently talked with an HR director whose company had a sign-on bonus program. The company is in a tight labor market, and it offered a great incentive package for new employees. The intent of the program was to attract and retain the best workers. New hires received the bonus immediately in exchange for a promise that they would for a certain length of time -- six months to two years is typical of these programs.

I asked the HR director two questions: Is it working? And how do you recoup the money when employees leave before their time is up?

Guess what his answers were.

"I don't know," and "We don't track whether they work as long as required, so we don't have a collection [pay back] process."

Apparently, one department processes the payments, and no department was responsible for collection. There was no tracking of employees in the program -- no evaluation of whether the program attracted "good" employees or how long they stayed.

Ask yourself this. Could the marketing department get away with such a thing? If a car dealer offered $1000 cash back and didn't sell any more cars than usual, would management continue that campaign? If a retailer offered a rebate for purchases of $100 or more but the cashier paid it out to everyone who came in the store, would that person have a job tomorrow?

We'll assume the company -- which was very large, keeping the human resources and payroll departments very busy -- simply could not manage the new hire sign-on bonus any better than it did because it had to work with a manual payroll system, which can be very labor intensive. Maybe the cost of manually handling the extra workload compared with the bonus payments that might have been returned did not justify the extra man hours that would have been required. But with an automated time and attendance system, this program could easily have been monitored both for effectiveness and compliance. Participants receiving the bonus payment could be flagged in the system. Their employment could be tracked so that if they were to leave the company before fulfilling their time in service commitment, the supervisor and payroll department could be notified to collect the amount of the bonus from the final paycheck. If an individual had insufficient payroll dollars coming to him or her to reimburse the employer, then further action could be taken to recover the money.

Not only is the recovery of these funds important, the employer ought to be concerned about the message conveyed when such a program is not policed. Employees talk to each other. Workers study compensation programs and become students of them -- not just what is written, but what is enforced. They are smart, and when it comes to money, they don't miss much. And besides, you wouldn't want to run your business they way Congress runs its -- would you?

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Stephen Hawley Martin is a former principal of The Martin Agency in Richmond and the author of more than half a dozen books including his newest, Lean Enterprise Leader: How to Get Things Done Without Doing It All Yourself. He is editor and publisher of The Oaklea Press, a book publishing business dedicated primarily to helping business executives increase productivity.