Jack Welch, the most well known and outspoken CEO of GE wrote very clearly about differentiation and rewarding employees when he said: “ When people differentiation is real, the top 20 percent of employees are showered with bonuses, stock options, praise, love, training, and a variety of rewards to their pocketbooks and souls. There can be no mistaking the stars at a company that differentiates. They are the best and are treated that way” (Welch, 2005, Pg. 41). A bonus is a lump sum payment which is significant enough for an employee to motivate him/her.
Clearly a hundred dollar bonus would do little to motivate an employee who makes $100,000 per annum but a $20,000 bonus would be certainly useful. None of the sources given declares the exact amount of bonuses per salary bracket at GE but Grote (2002) says that the useable figures for realistic and motivating bonuses are between 9-12% of the person’ s yearly income. This is a significant amount and we should use this value as a guide for making our rewards at the end of a quarter for those employees who show their commitment to the company and its values.
By making our company values the primary method of judging employees performance we can directly link our mission statement of being profitable to how our employees perform. In terms of links to the mission of the company to the reward system, Welch (2005, Pg. 16) says that “ Every decision or initiative was linked to the mission. We publicly rewarded people who drove the mission and let go of people who couldn’ t deal with it for whatever reason. ” GE’ s own mission when Jack Welch was running the company was to be the most competitive company in the world which fits with the two-pronged approach of rewarding and doing the utmost to keep the best talent within the company and letting go of those who do not perform to a certain level.
Rewards by Selection The process of establishing who must be rewarded is a rather delicate question and often creates a huge debate for the senior management groups. GE’ s policies make it quite clear that all the attention is not given to the top 20% or the bottom 10% of the pile. In fact, Mr Welch (2005) declares the middle 70% to be the most valued asset for the company since they are the ones who do the majority of the work.
With enough training at the attention this group could produce many stars at a future date. At GE, managers are asked to spend at least half of their time with the middle 70% along with half the rewards that are going to be distributed to the performers.
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