'Greed Is Good' – Remuneration, Motivation And
Organisation
Author: Jonathan Palmer

The 1980's business culture in the USA and internationally put
a considerable emphasis on personal reward on the basis that
highly motivated individuals could transform organisations and
societies. The extreme example in film was Gordon Gekko in Wall
Street stating that greed was good. The 90's, however, have seen
companies traumatised and bankrupted by the inappropriate use of
remuneration as a motivator. Yet major corporate successes have
been built on reward based remuneration systems. Phones4U
recently and Allied Dunbar in the financial services market is
an earlier example.

The notorious Barings Bank had individual traders on bonuses in
the millions yet in the long term these motivated individuals
were not fulfilling the company's objectives. Moreover even
when an individual's reward system is based on entirely
appropriate performance indicators, resulting in the
organisation's success and he or she is rewarded, there may
still be problems arising from the large differential between
salaries of senior people and those of middle management. A
payment system that depresses or demotivates 10 people for
every one it motivates may not be the best for the
organisation.

Wise organisations are therefore trying to reward and motivate
all staff so that staff act energetically to further the
corporation's interests both short and long term and feel they
have been treated fairly. However there must be properly in
place the link between the items on which they are being
rewarded and the actions they are able to take to influence the
desired outcome.

A wise organisation accepts that:

• It is reasonable for the individual manager to act in his or
her own interests.
• Managers work for people not organisations and want to please
the superiors closest to them, or failing that, their peer
group.
• Managers want to achieve and will be attracted to those tasks
at which they know they can succeed, usually favouring the short
term at the expense of the long term.

The clear implication is that an organisation should lay some
groundwork before relying on a remuneration structure to change
performance and behaviour. In other words the management and
organisation system must be in balance with the remuneration
system.

There are 5 major pre-conditions to the installation of an
effective reward structure.

1. Measurement: "If you don't measure it you won't get it".
There are various measurement systems of which Balanced
Scorecard, which sets multiple objectives and is used by Tesco,
is perhaps the best known.

2. Monitoring: If the performance measures are not monitored
properly or only monitored in a review at the year end, it can
give the manager signals that they don't really matter or,
worse still, that failure is acceptable providing all the
managers fail together.

3. Control of the tools for the job: The organisation must
ensure that the individual is not over dependent on factors
outside his control to achieve the performance measures set out
(this is the 'how' part of the equation).

4. Consistency: Ensuring that short term organisational factors
don't over-influence managers or drive them from their real
objective. The organisation must also ensure that its own
design (be it bureaucratic or loose) is appropriate to what is
being asked of managers.

5. Reward and strategy in line: An organisation's achieving a
clear strategy is not an event that will take place in the
future; it is a journey. A remuneration system can be put into
an organisation even when it has a relatively muddled strategy
providing that organisational and management disputes are
resolved by reference to strategy and the "balanced score
card". Only then will there be pressure on the organisation to
refine its strategy, structure and remuneration systems.

Based on these 5 pre conditions, there is a checklist of 10
factors that the effective remuneration and reward structure
must achieve:

1. Support the business strategy
2. Encourage the desired behaviour
3. Reward relevant performance
4. Be fair
5. Be substantial
6. Be tax efficient
7. Be timely (The reward must take place close to the
achievement)
8. Incorporate non financial rewards (Recognition can be as
important as cash)
9. Be firm (A bonus lost through missing target should not be
recoverable whereas a salary increase should only be delayed
until target is reached)
10. Be crystal clear


About The Author: Jonathan Palmer MA MSc, Principal; The Bridge
Management Group writes for IMS Interim Executives, an
international S-Cat approved interim management provider. Visit
http://www.ims.uk.com for interim change and turnaround
management consultancy; for project management visit
http://www.ims.uk.com/project-management.asp