Goodbye to carrots: the stick is back
Businesses are going to find new ways to motivate staff, says Jeremy Hazlehurst
The City’s bonus culture has come in for a lot of criticism recently. The Governor of the Bank of England Mervyn King said that he found the idea of massive bonuses “unattractive”, while Alistair Darling, the Chancellor of the Exchequer, also said that he considered massive pay-outs “frustrating”.
Well, their comments could be written off as irrelevant – it’s hard to imagine the head of a large investment bank suddenly feeling the scales drop from his eyes, and believe that he is corroding the moral fibre of the country with the bonuses he pays his staff. He is more likely to take another sip of Margaux.
But there could be more to be said against bonuses, especially now the tough times are here. It’s all very well handing out massive pay-packets to people who bring home the bacon in the boom years. When things start to go belly up, then the focus changes.
Swimming Naked
As Warren Buffet says, it’s only when the sea goes out that you find out who was swimming naked. With the amount of wreckage floating around the markets at the moment, it’s starting to look like Whisky Galore on a nudist beach out there.
It might well be time to start wondering if the culture of dangling large, gold-plated carrots in front of employees has gone too far, and that it might be time to rediscover the stick. One of those who says so is Ashley Semmens, the straight-talking Aussie Director of London-based consultancy WCL. This month, his company launches a programme called Impact in the UK, aimed at FTSE 100 companies.
Although it is new here, the approach already has some impressive adherents: among those already using the research that has informed Impact, says WCL, are pharmaceuticals giant GlaxoSmithKline fast food chain McDonalds, soft-drinks company Coca-Cola and the bank ING.
Elite Organisations
Impact is based on research by an Australian performance research company called Elkiem, which looked into the characteristics of high-performing people like Nelson Mandela, Sir Edmund Hillary and the SAS soldier-turned-author Andy McNab.
In the course of this research, they became interested in the environments that had made these people what they were. This led them to look at elite organisations that produce high performers, such as the Samurai, the Royal School of Music, NASA and Harvard University.
Their research, says Semmens, is based on two premises: that humans adapt to the environment they find themselves in, and that there is a unique set of circumstances that drives people towards high performance. It is creating these circumstances that can improve performance in businesses.
Impact takes the lessons learned and focuses on “accountability”, and “tackling under-achievement by senior management and their teams.”
If you think that sounds a bit stern, then you might be right. But as Semmens points out, if there was ever a time when sternness was needed, then this is it.
He says that many financial services companies have built up a culture over the past few years where they have concentrated on rewarding their top people and assume that is enough to keep the bottom line looking healthy. But that can filter through the company, and it doesn’t prepare you for tough times.
“The bonus culture creates a psychology of expectation. People start to expect a bonus even if you have an average year,” he says. “Our perspective on how organisations are managing performance is that they are very focussed on the reward system and not enough on accountability. People can get away with average or substandard performance. A number of people out there are not getting the best out of their business. If they are loose, then they need to be tight. They need to hold people to account for both good performance and bad.”
MRI Scan
The first thing that WCL do when they go into a business is to analyse its performance in detail. If a normal analysis of a business is an X-ray, says Semmens, then what his company does is an MRI scan. One of the classic things that they find in businesses is that “the numbers aren’t trusted”.
A lot of time and effort goes into quantifying performance in many businesses, Semmens says, but in a lot of cases “people don’t really feel that they reflect their performance, or they feel undermined because of unrealistic targets, or too easy.”
Getting the measures right is absolutely basic and vital, and even more so now: in the bad times, people tend to blame the weakness of the market for their own poor performance. Managers need to know how far that is true.
One of the characteristics of the elite organisations that Elkiem studied was that the people involved knew exactly what was required of them, and that this was communicated to them clearly by those in charge.
High Support
For all the talk of sticks, the solution is a lot more complicated than identifying the people who are slowing the business down and handing them their P45s. “High performance means high support,” says Semmens.
“You need to be brutally clear on targets they have to achieve. They need to understand what constitutes success and what constitutes failure. “The important thing is that if somebody does achieve, then they should receive emotional pleasure,” he explains. “On the counter side, non-performance should mean discomfort.”
As an example, he cites pilots who fly for the Australian airline Quantas. Once they reach the age of 40, they have to take and pass nine tests a year to keep flying. In this case, they know exactly what they have to do, and what the consequences will be if they fail.
At the end of the day, all this comes down to good leadership. “The leaders drive accountability and the actions of their staff, and we go in and analyse the environment, to see if leaders have created the right environment for high performance.”
That’s about ensuring that managers are equipped to do the job that is required of them, that staff are absolutely clear what is required of them and that accountability is happening. “Whether you are manufacturing widgets or getting returns on funds, you have to get the same things right.”
Times are changing. And the only carrots you will be seeing in the near future are the ones that will go in your the brain-boosting breakfast smoothies.