“Greed is Good”—Reward, Motivation, and Organization

“Greed is Good”—Reward, Motivation, and Organization

The corporate culture of the 1980s in the United States and around the world placed great emphasis on personal reward because highly motivated individuals could transform organizations and societies. An extreme film example was Wall Street's Gordon Gekko, who said greed is good. Companies were bankrupted in the 1990s as a result of the misuse of salary as a motivator. Salary-based remuneration systems are the foundation of great business success.Phones4U recently and Allied Dunbar in the financial services market are two earlier examples.

The famous Barings Bank had individual traders with multi-million dollar bonuses, but in the long run, these motivated individuals fell short of the company's goals. Even if an individual's compensation system is based on perfectly reasonable KPIs that drive the organization's success and that individual is rewarded, there can still be problems arising from the significant pay gap between executives and middle managers. A

A payment system that depresses or demotivates 10% of all motivated people may not be the best thing for an organization.

Smart organizations, therefore, strive to reward and motivate all employees to work vigorously in the company's short- and long-term interests and to feel treated fairly. However, there must be a reasonable balance between the items they are rewarded for and the actions they can take to influence the desired outcome.

An intelligent organization accepts the following:

It is wise for an individual manager to act in his or her own best interests.

Managers work for people, not organizations, and want to please their immediate manager and, in their absence, their peers.

Managers want and will attract tasks they know they can be successful at and usually prefer the short-term to the long-term.

The clear implication is that an organization must lay the groundwork before relying on the compensation structure to change performance and behavior. This means that the management and organizational system must be consistent with the remuneration system.

There are five key requirements for creating an effective reward structure.

1. Measure:

"If you don't measure it, you don't get it." There are various measurement systems, the most well-known of which is the Balanced Scorecard, which sets different targets and is used by Tesco.

2. Monitoring:

When KPIs are not properly monitored or only monitored during the year-end audit, it can send signals to the manager that they don't really matter, or worse, that failure is acceptable provided all managers fail collectively.

3. Control of tools:

The organization must ensure that the individual is not overly dependent on factors beyond their control to achieve specific performance indicators (this is part of the "how" equation).

4. Consistency:

ensuring that short-term organizational factors do not unduly influence managers or distract them from their true purpose. The organization must also ensure that its design (bureaucratic or flexible) meets the needs of managers.

 5. Alignment of Reward and Strategy:

Achieving a clear strategy for an organization is not a future event; it's a journey. Even if the strategy is relatively unclear, a reward system can be introduced in an organization as long as organizational and management disputes are resolved on the basis of the strategy and a "balanced scorecard." Only then will the organization be pressured to refine its strategy, structure, and compensation systems?

Based on these five requirements, there is a list of 10 factors that an effective compensation structure must meet:

1. Upholding company strategy

2. Encouraging Desirable Behavior

3. Rewarding Reasonable Performance

4. Honesty

5. Being practical

6. Be fiscally efficient

7. Act ahead (the reward should be close to the performance).

8. Introduce non-financial rewards (recognition can be as important as cash).

9. Be steadfast (loss of bonus from not meeting a goal should not be claimable, while raises should only be deferred until the target is met).

10. Be crystal clear.