Archive for February, 2012

February 3, 2012

Why the RBS Bonus Furore Should Give All Employers Pause for Thought About Rewards

So ex-RBS boss Sir Fred Goodwin is now plain old “Fred the Pleb”, having been stripped of his Knighthood for leading (pushing?) the bank off the economic gang-plank.  And now the current boss, Stephen Hester has been forced to hand back his hefty share bonus after political and media furore in theUK.

Both of them were deprived of their performance-related honorific or financial reward because of a perceived or real mismatch between what they got and what they had actually achieved

Stephen Hester’s reward package was put together when he joined the organisation in 2008, just after the taxpayer bailout of the failing bank and the organisation was desperate to find the right person to get the bank back on track.

But the leaders clearly made a classic reward package error – they failed to align their reward system with the true values of the business.   In other words, the company misjudged the feelings of the new owners – ie, the millions of British taxpayers who through the government now effectively own a majority of shares in the bank..

It’s an easy mistake to make: and one that many other companies commit when creating reward systems for their employees.  Instead of ensuring that employee reward is linked to the values of the business (in this case influenced extensively by the public and the politicians), they look at micro-performance and reward for individual achievements measured in a simplistic quantitative way.

To be fair it is a complicated business. And it’s no easier getting a reward system right for customer service employees than it is for chief executives.  It involves addressing difficult strategic questions like:

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