Larry Page recently replaced Eric Schmidt as the CEO of Google, and he's made some interesting changes.
According to BusinessInsider.com, one of Larry's passions is social networking, and so he's decided to make sure his employees are better at it. Larry is said to have sent a confidential memo to select employees, dictating that 25 percent of their annual bonus will depend on how their 2011 Social Networking strategy performs.
In my opinion, this is a great strategy. Far too often employee compensation is based on a predetermined HR decision, or worse, the subjective viewpoint of an individual manager. Matching metrics and the achievement of specific tasks to compensation reduces the amount of arguing among team members and helps ensure that everyone is treated fairly. It also reduces decision-making complexity on the manager's part.
The danger of a move like Larry's is that the definition of "performance" is too vague. If you are going to issue an ultimatum like this, you'd better be sure you can measure it, and that you clearly communicate your expectations in advance. For instance, in the case of Google, which employees are responsible for which aspects of project "Emerald Sea," and what will they do exactly to get those bonuses?
Ultimatums can drive employee motivation and boost productivity if done right, but they can be destructive if done wrong. You don't, for example, want to tell your people that they will be laid off or fired if they don't make their numbers, for this will merely paralyze them. You also want to make sure that your request is not unreasonable or irrational, and that you aren't springing it on employees without giving them adequate time to prepare. And finally, you must follow through. Nothing is more ineffective than an ultimatum that is not delivered upon.