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June 2010

Solving the Great Bonus Conundrum!

In what has been a very interesting week here in the UK, two things in particular have stood out for me (apart from THAT remarkable tennis match at Wimbledon!)

The first, included amongst the many measures to tackle public sector spending identified in the emergency budget, was the announcement of a commission that would look to restrict government department heads' pay to 20 times that of their lowest paid employees.

The second was that 6 senior employees of Network Rail, a non-government but publicly funded company, were to share a bonus of over £1.2 million between them, despite a government request asking them to "show restraint." BBC late night news reported that, despite areas of underperformance, the Chief Executive would receive a bonus in excess of £600K that would effectively double his earnings.

So in one instance you appear to have a constructive measure being taken to find a solution, while in the other you have the perfect illustration of the nature of the problem that needs to be addressed. If you applied the proposed solution to the Network Rail situation, it would mean that the lowest paid Network Rail employee would have to be earning in excess of £60K pa, or roughly 3 times the average national wage!

Extrapolate this across the whole economy and you can understand why employee engagement is the major problem it is. The good news is that it is forcing a major issue into the open.

The HR profession certainly should be questioning how it ever allowed situations like this to arise in the first place. That, however, is to look backwards, and serves little purpose. The only positive in doing so, is that it shows the folly of not giving HR the same strategic weight as other functions around the Boardroom table. Yet, it places the onus on HR to step up to the plate and prove that it warrants a place at the table and is up to the task. Strategic HR professionals should thus be alert to this state of affairs and be looking ahead and preparing for the consequences.

There can be no doubt that pay differentials will be coming under closer scrutiny. Strategic HR professionals need to recognise this and start finding answers to such questions as:

  • What pay differentials are justified? The government has drawn a line in the sand by suggesting that CEO salaries should not be more than 20 times the lowest paid. If this is not appropriate a strong case will have to be made for anything greater.
  • Is it reasonable to offer varying rates for incentives depending on your rank or salary band? E.g. If the CEO gets 100% of his salary as a bonus, does everyone else in the organisation also get 100%?
  • Is performance related pay even really appropriate in modern business where - as BP so clearly illustrates - organisational integrity demands greater strategic alignment?
  • Do you spread the pain of reduced executive remuneration over time? If so, how?

These are just some of the issues that strategic HR professionals need to be asking themselves. They contain the key to improving employee engagement and resolving the issues that have so recently come to the fore. Manage this properly and the place at the head table is assured. Who would have thought it, but the government has opened the door.

Real Engagement!

There can be very few people who are not aware that the Football (Soccer) World Cup is currently taking place. This time is it is really a historic event because, for the first time in the event's 80 year history, it is being held on the African continent.

The joy and pride that this has caused is not just confined to the host nation, South Africa, but has spread throughout the continent. Needless to say, though, there is a special pride in South Africa that has enveloped all those who fortunate enough to be there, no matter how world-weary or cynical or disinterested in football they might be.

One friend reported a conversation with some visitors from Brazil attending their 6th World Cup who said it was already the most memorable and the most enjoyable they had been to - and the month long event is still in its first week! It is truly a national party. The goodwill and joy is touching everyone and just has to continue to bless. Maybe these pictures - taken during a home team tour before the tournament even began - will help you get a sense of the spirit and atmosphere. Bafanabafan480

As you look at them, just ask yourself, what a difference employee engagement with this kind of zeal and passion would make to your business. Does your organisation have that kind of team spirit or home support? Clearly it is possible. So what do you need to do to create it? 



Could you be a BP?

Marlin_semi_sub_platform Let me be clear. This is not an attack on BP. I do not have enough knowledge about the situation to jump on the bandwagon and, while I am as horrified and angry as anyone not directly affected, I also happen to believe that criticism without the complete facts is nothing more than prejudice.

Nevertheless there are immediate lessons that can be learned. For me the immediate, glaring lesson stems from CEO Tony Hayward's undertaking when taking up the post to "focus like a laser on safety." He is reported to have said, "Leaders must make safety of all who work for them their top priority." He also listed as another of his priorities "conducting our operations without damaging the environment." (Daily Telegraph, 3 May 2010.) Clearly he has failed to deliver what he promised.

This failure is ample proof - if it was needed - of two things:-
1. Intention without action is useless.
2. What a leader says does not inevitably just happen in an organisation.

It is the latter that is the key. It reinforces the point I made last week about organisational integrity. Hence the headline question. You may not be susceptible to business risks on anything like the same scale, but the consequences of a disater could be just as devastating to your reputation and/or your business - even to the ultimate extent of the demise of your business. 

To reduce the risk of such failure it is imperative you find an effective mechanism to engage employees and create the shared values that ensure that everyone acts to the same standard. Employee ownership is manifestly the ideal way to engender the employee engagement and sense of responsibility to ensure such organisational integrity and minimise the risk.

Do you have organisational integrity?

Just in case you are wondering, 'organisational integrity' is the collective form of personal integrity. It transcends strategic alignment and occurs when an organisation lives up to its professed values and actually 'walks the talk.' Walk the talk

Unfortunately very few organisations seem to have it. Let me give you an example.

I have been helping a friend to set up a new change management training company. We duly registered the company and embarked upon opening a bank account. After all you cannot do anything else in business without a bank account (although being asked if we had a website suggests banks think differently!) The experience, however, has been an adventure in itself.

Now I am sure everyone has their own "Believe It or Not" experience or other horror story to tell of dealings with banks, so I will not bore you with the sorry details of ours. Suffice to say that after nearly 3 weeks we seemed to be no nearer to opening the account than when we began. Yet, even in the most technically advanced period in history, the bank seems to think it is good service to take up to 21 days for this. Unfortunately opening ours will exceed even that tortoise-like estimate!

So, with a list of issues, I thought it might help to tell someone about our problems. Perhaps I should know better by now, but my naivety knows no bounds and as a consultant I have to believe that organisations are striving to do better. And they need customer feedback to do so.

I was encouraged in this by the bank's website, which amongst other similar claims, stated, "Give us the opportunity to put things right. If you are dissatisfied with any part of our service, it's important that you let us know." Further on it added, "Our commitment to you … is to provide you with excellent customer service. However, we realise that occasionally we may fail to meet your expectations. To help you, we want to deal with any concerns or suggestions you may have as quickly as possible. So, if there is something we are not doing as well as you would want or expect, please tell us." Naturally this reinforced my good intentions and I duly phoned.

After some delays navigating the automated response which offered no appropriate category, the system finally got annoyed enough to put me through to a live "customer services representative." This young lass was unable to deal with my complaint because I could not give her an account number. I explained that this inability was substantially what I was complaining about, but the irony was completely wasted on her. So I was obliged to hang up before saying something most inappropriate for the recording!

Clearly service is something this bank does not offer to anyone who is not yet a customer. Strange that, as we chose it because of its awards for being the best business bank, but we can only hope that things will get better once we have surmounted the barriers to achieving that favoured status.

This experience typifies what I mean by a lack of organisational integrity. It is something that actually goes beyond a lack of strategic alignment and corrodes the very essence of the organisation and its viability. The actions clearly do not conform to the stated intention and there is a values gap.  A "rules are rules" mentality clearly drives operations and no-one is encouraged to use their initiative or consider what the customer really wants.

This is precisely the attitude that I am fighting and why I passionately believe the Zealise solution is vital. The employee ownership model it creates offers an unparalleled way to create the employee engagement essential to break down this kind of unrecognised, ingrained behaviour. More than that, it is the only way I know to build and sustain the kind or organisational integrity essential for sustained business success.

In the words of the old song, "If you want it, here it is. Come and get it!"