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:

  • What are our real values – rather than those we aspire to and perhaps include in our brand statements?
  • What do we really value in our employees?
  • How do we reward so that we balance short term success with sustainable business growth?
  • How do we reward so that we encourage team support as well as individual achievement?
  • How do we find the right reward so that all of our employees will be motivated to achieve more?
  • How do we measure performance in a fair, reliable and efficient way?

And there are many more questions like that to answer before employees can be rewarded in a way that not only incentivises individuals to achieve but also matches and promotes the business values, alongside securing the long term success of the organisation.

As far as rewarding customer service roles go, the reward structures can easily stray from the values of the business.  Customer service may be frequently talked about as a company goal but if call centre staff or sales advisers are measured in terms of number of calls taken or volume of sales made, the clear message is that customer service is of secondary importance to calls or sales.

It is true that these measures of performance offer advantages.  They are easy, immediate and quantitative measures and are related to a central aspect of overall business performance.   The problem here is that reward focuses attention and effort on the behaviour that brings the output that is measured, at the expense of other behaviour.

If the focus is on individually attained volume rather than end-user satisfaction or on what might be called pro-social organisational behaviour (you could substitute teamwork here for a lighter touch!), then this is what will increase. That would be fine except, chances are, there will be a corresponding decline in efforts directed towards customer satisfaction and supporting others to perform and achieve.

In this case, the well-intentioned rewarding of those who succeed in their roles leads to a culture of behaviour that fails to prioritise genuine and rewarding customer interaction and so risks detracting from an organisation’s longer term competitive advantage.  In addition, by distracting performance efforts away from pro-social behaviour it does nothing to improve employee well-being and may even negatively impact on overall team performance, which has the potential to be more than just the sum of its parts. Finally, it plays little or no part in ensuring that a customer service organisation delivers on any espoused values of customer-centricity and customer service.

It’s easy to see how the RBS Chief executive reward system went wrong and perhaps balance seems to have been restored with his handing back of his bonus. Talk is that he may well move on to a less-public role where he can be rewarded quietly. Yet so many less scrutinised organisations are rewarding their customer service employees with a similar kind of ill-fated mismatch with business values.  Perhaps the very public example made of RBS might give them some pause for thought.

One Comment to “Why the RBS Bonus Furore Should Give All Employers Pause for Thought About Rewards”

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