The government aren't going to put anyone on the board of these new public private partnerships, and it's still unclear how they intend to meet their commitments to control bonus payments.
And is it the right action anyway? Even if doing this is achievable, and it doesn't simply result in the reintroduction of the sort of allowances that were brought in to get around reward legislation in the 1970/80's, it's going to result in disengagement and a continued flight of talent to purely private financial organisations eg the hedge funds.
As I noted in Talking HR (002), the issue for me is more on of cultural change than reward policy.
I'm reminded of Howard Gardner's and Mihaly Csikszentmihalhi's call in their book 'Good Work' to constrain executives and managers by a code of professional ethics - a corporate equivalent of the Hippocratic Oath, vowing to 'never do harm', to act 'for the good of my customers and shareholders', and to 'not play God with people’s lives' (see these comments in strategy+business):
"The drive for competitive advantage and wealth, he argues, has taken business’s attention away from the almost chivalric honor of the professional doctor or lawyer. To be sure, doctors and lawyers don’t always live up to their codes of ethics. But the codes exist, forcing practitioners to confront their everyday ethical dilemmas consciously. This kind of thinking, over time, builds not just individual cognitive capacity for leaders, but also the collective ability of organizations to operate in a more complex world and satisfy the real needs of larger groups of people."
I think this call is now starting to look quite prescient:
"The very survival of business may depend on a more widespread benefit. Just as the church of latter-day Europe lost its influence when the mass of society began to doubt its relevance, so too could corporate enterprises be rejected by the body politic — consumers, employees, and even shareholders — if they fail to generate wealth for more than a privileged few."
Gardner believes there is a substantial opportunity in this - in that:
"Knowledge workers will flock to companies that embrace high standards of excellence and that allow them to feel engaged with society, leaving other firms with the less talented, less motivated members of the workforce."
This would be a major cultural change in city institutions, but I think that's probably what they need...
Quite late in life I realised that what I thought had been "O level British history" was the the history of commerce.
ReplyDeleteThe banking crisis is a matter of governance - the theme of british history - south sea bubble, the idea of limited companies etc.
In France, if you so much as bounce a cheque, you are in deep deep trouble. We need to look at the companies act and the obligations of Directors. This is governane not management.
Then we need to ask why managers have a different formula to other members of the organization. This is not an international standard. What is the class system doing in 2008? I thought we lost that in 1918.
Very well put together Jon. You aside, as I mention in our blog (www.couraud.com), why isn't the 'HR community' making much more of a song and dance about this stuff?
ReplyDeleteFor the first time that I can remember, an HR issue is the no.1 headline around the world. And what do we get from most HR professionals. Silence.
It's kinda depressing.
Thanks both.
ReplyDeleteJo, thanks for your points - although I don't agree. I wouldn't design companies the way they exist today, but we've only recently had a debate on the companies act, and I don't think our company structures and governance should get in the way of sound management, which I still see as the heart of this problem.
And I don't have any issues with different formulas for different groups of staff - in fact I see this trend increasing to more different populations.
Nick - I think the issue is that a lot of us see our job as implementing the structures (doing what we're told) rather than taking accountability for ensuring these structures are appropriate.
It's not from HR, but I've also come across these comments on reward in financial services in Business Week: http://www.businessweek.com/managing/content/oct2008/ca2008107_373360.htm?campaign_id=rss_null :
"We are now living with the consequences of poor collective decision-making, a herd mentality that seemed to be about following the rainbow, and reward and accounting practices that excessively encouraged such behavior. Despite their state-of-the-market tools for portfolio management, risk management, and hedging, too many of these companies did not engender a culture of collaborative risk-sharing, of teamwork, of understanding and rewarding long-term as well as short-term success, and of training their people and aligning them with these principles.
For many years, these institutions have limited their focus on human resources and talent management primarily to finding the best or hungriest candidates, giving them virtual carte blanche, and rewarding their individual successes. Financial service firms have used this approach to pay sizable bonuses based on the apparent short-term success of the assets, without a clear understanding of, or connection to, the long-term risks.
It's an old-fashioned view of talent management and an example of the free rein and high rewards to individuals that brought about the downfall of other high-profile companies in the past, such as Enron, Worldcom, and Barings. But there appeared to be little incentive to change while the profits flowed — until now."
It's also been quite interesting watching these problems from Malaysia and now the UAE this week.
ReplyDeleteThe Islamic banks here are required to conduct closer scrutiny of assets they lend against than their conventional counterparts, so seem relative immune from the financial crisis.
But the founder of US based Islamic financial firm, Lariba comments that the reasons behind the crisis are due to lack of "moral and ethical values among bankers", and not just lack of regulations - ie the lack of the sort of code discussed by Gardner.