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Posts Tagged ‘bonus’

“Sharing is a special way of caring…” That line comes from that purple dinosaur – Barney. It was sound advice for my oldest daughter when she was still a little thing having her first baby crush on Barney. Barney helped us teach her that sharing what you have is a special way of showing people that you care. Unfortunately Barney isn’t that big anymore and we have to do most of this teaching all by ourselves when it comes to my little one. She get’s the message though as we pass along the Barney wisdom from generation to generation. But not everyone remembers this piece of wisdom. Especially not in these times when banks and other financial institutions are hit hard because of how they pay out bonuses.

Bonus payments will always be a tough nut to crack and will always leave someone unhappy. Each business is different and different people play different roles depending on the company in question. Sometimes it is a difficult pill to swallow when a “generic” senior executive receive a bonus that feels less grounded on the broader effort of everyone at the firm. But I have seen enough companies with dynamic leaders who make the difficult decisions, led companies into growth or out of difficult circumstances, and who owned up to their responsibilities to know that not everyone is truly equal in any company. Even though we would love to think everyone plays an equally important role in a company the truth is that some people play a leadership role for a reason and they should be compensated for that.

However, emphasis on compensation. Each person should be paid according to their role and responsibilities. Bonuses tend to be a broader reflection on how a company and specific department performed, the specific role that an individual played in that performance and how long a person has been with a company – performance, effort and loyalty. It should not be about one single thing – “My department did the best” is not a good enough argument for super bonuses if the company as a whole failed. That’s the problem most people have with the bonuses paid at certain financial institutions. Salary as compensation reflects the role and responsibility and bonuses tend to reflect performance, effort and loyalty (of course these three will also have an impact on long-term salary and promotions.)

What is a fair bonus? Like I said, each company and industry is different. And, to tell you the honest truth, the discussion here is really a theoretical one for me personally. I’ve never worked at a company where the bonus structure has been an issue. It’s always been fair and transparent. It’s also not something that has been a key issue for me from a CSR and Sustainability perspective. My questions from this perspective would typically be about transparency, governance, whether CSR/Sustainability goals played a role in establishing bonuses, how it impacts CSR/Sustainability, employee relations etc. Never really about the actual bonus structure. Maybe I should but there are more important things to focus on from a CSR and Sustainability perspective – and I haven’t worked with banks or other financial institutions that often.

But I do know fairness when I see it. And sometimes this fairness blows me away. This line says it all: “all of them – from the chairman … and the managing director … down to shop assistants and shelf-stackers – get the same percentage payout.” Hang on a minute. You mean they share the bonus pot equally? That’s a bit of a shocker. Must be some small little business somewhere or a bunch of trade unionist running a lunch-time cafeteria, right? No. It’s the John Lewis Partnership. For those who don’t live in the UK, they are a large company (just over $11bn in sales) that owns leading UK retail businesses – Waitrose, John Lewis and Greenbee.  And by “they” I mean all 70,000 permanent staff. That’s why they are called the John Lewis PARTNERSHIP. They all own John Lewis. Still, it’s a pretty novel idea to share bonuses equally.

Most people applauded this but some people commented in The Guardian piece that the actual amount each one got paid should have been the same. I think that is missing the point that each one gets compensated according to his or her role and responsibility and the percentage bonus payment is therefore also a reflection of this. We do, after all, still live in a world dominated by a more or less free market.

I am impressed because it shows more than just a Barney culture of caring. It reflects the view that we either fail together or we succeed together. The essence of a partnership and the essence of the John Lewis ownership structure.

I don’t think most companies can do it the John lewis way. Maybe those owned or bailed out by governments should implement such a John Lewis-styled bonus structure. But the majority of companies are not partnerships and have different masters. The John Lewis example is the extreme but more companies can learn from the basic principle and work to ensure that their bonus structure reflects the basic values – all employees work together to make a company succeed (or help get the company through a tough time) and they should therefore be treated equally. Maybe not exactly equal – my rule of performance, effort and seniority should play a differentiating role. But at the very least there should be some level transparency and equality built in to ensure all good work gets rewarded. Of course it also sends a strong message to all John Lewis workers – let’s pull together to get through the tough times as we will all benefit from an upturn. This way everyone feels ownership of their working world and believe that as long as they work hard and do their best they will be treated fairly. And the outside world will judge the company on how they treat their workers – as equals or not? If it’s greed – is it driven by a top-heavy greed or equally shared? If it is truly about equality and everyone having to do their best for the company – is it reflected in the bonus structure? I think that’s the part that many of the banks and financial institutions just don’t get.

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