Thursday, April 1, 2010

Which Business Strategy Is Good : " Greed Is Good" Or "Safety & Security Is Good".

I think there is a paradigm shift that's happening
in the world of Strategic Management today, the remuneration
is not the only factor which matters, and interestingly I
was reading a post from MORRIS CHAMBERS
‘Greed Is Good’ – Remuneration, Motivation
And Organization.

Lot of works has been done about the positive
co-relation between remuneration and motivation.

In MORRIS CHAMBER, it has laid down the basics
factors that have been look-in to motivation
and remuneration, all the fine tuning that’s
required and the employee alignments to corporate
strategy alignments.

They have layed down five basic points
which in my opinion is very relevant in
today's corporatism.

”There are 5 major pre-conditions to the
installation of an effective reward structure.
1. Measurement: “If you don’t measure it you won’t get it”.
There are various measurement systems of which Balanced Scorecard,
which sets multiple objectives and is used by Tesco,
is perhaps the best known.

2. Monitoring: If the performance measures are not monitored
properly or only monitored in a review at the year end, it can
give the manager signals that they don’t really matter or,
worse still, that failure is acceptable providing all the
managers fail together.

3. Control of the tools for the job: The organization
must ensure that the individual is not over dependent on
factors outside his control to achieve the performance
measures set out (this is the ‘how’ part of the equation).

4. Consistency: Ensuring that short term organizational
factors don’t over-influence managers or drive them from their
real objective. The organization must also ensure that its own
design (be it bureaucratic or loose) is appropriate to what
is being asked of managers.

5. Reward and strategy in line: An organization’s achieving
a clear strategy is not an event that will take place in the
future; it is a journey. A remuneration system can be put
into an organization even when it has a relatively muddled
strategy providing that organizational and management
disputes are resolved by reference to strategy and the
“balanced score card”. Only then will there be pressure
on the organization to refine its strategy, structure
and remuneration systems.

Based on these 5 pre conditions, there is a checklist
of 10 factors that the effective remuneration and
reward structure must achieve:

1. Support the business strategy
2. Encourage the desired behaviors
3. Reward relevant performance
4. Be fair
5. Be substantial
6. Be tax efficient
7. Be timely (The reward must take place close to the achievement)
8. Incorporate non financial rewards (Recognition can be as important as cash)
9. Be firm (A bonus lost through missing target should not be recoverable whereas a salary increase should only be delayed until target is reached)
10. Be crystal clear”

I loved McGregor's theory Y rather than theory X,
carrots and stick was the principals, and then came
the Sops, still the talent retaining is the major factor.

Motivation is an evergreen unsolved problem.

With logical reasoning and numerical thinking or
coding you can not measure motivation.
(Here I'm taking about +ve motivation)

Now the buzz word round the corporate world is
called "ENGAGEMENT" "Employee Engagement", "Customer Engagement".

Business Gurus, Business Strategist, HR practitioner,
HR Strategist all are taking about not motivating but
gainful engagement which in turn will lead to motivation.

Talk about the tools of BPR, Turnaround Management,
TQM or Six Sigma, CRM , whatever business strategy
you take it's all about engaging and motivating.

At the end of the day the stake holders are to be
satisfied and safe.

Michael Douglas acting in WALL STREET in the 80's
and his famous dialog
"Greed Is Good" may not be applicable in today’s' world.

Investors, VC’s, employees are very
skeptical, rather “Safety and Security is good" is better than
"Greed Is Good"