Rewarding high performers or loyal employees has never been such a public exercise. How staff are rewarded is viewed as a combustible mix of social and financial responsibility. Corporate reputation is at risk through a combination of potential regulatory censure, shareholder power following the “shareholder spring”, the mainstream media and the uncontrollable influence of social media.
Businesses can risk being seen as profligate and irresponsible, rewarding failure or throwing cash about, or as exploiting a hard-working workforce and their loyal customers for the sake of profit. As well as employees, customers and shareholders all having instant access to the public through social media, workers have access to the entire organisation through their employer’s email system, and could potentially use it to 'blow the whistle' or air their grievances.
This is the new reality and it needs to be taken seriously. There is a conviction that the legal and social pressures exerted on businesses are necessary to make them enforce ethical and responsible remuneration policies that are fair, equitable and above all about achievement. Issues like rewarding failure, avoiding tax, or taking advantage of local laws in foreign countries that are inconsistent with ours, are now treated as matters of public interest.
So, what can businesses do to strike the required balance?
Employees want to be valued and rewarded. Recognising and rewarding high performance financially is one of the easiest ways to improve and maintain employee morale and increase retention rates. However, there are other factors that employers need to consider.
Performance-related rewards must promote corporate values and incentivise employees to incorporate them into the way they work. This can be achieved in a number of ways, none of which are exclusive. For example, failure to follow internal compliance rules or company policies should perhaps result in a reduction in performance-related reward.
Bonus payments may be tied to department or company performance, not just individual results. Payment of bonuses may be deferred and expressly contingent on past and future adherence to company standards of conduct and ethics, or indeed on the long-term financial performance of the business.
There are also other steps that are important in increasing the perception of a fair rewards culture.
In order for high-achieving employees to value their rewards, employers should deal effectively with under-performers (using performance management and an effective appraisal system).
One of the most difficult dilemmas facing businesses arises when high-performing employees misbehave or breach the corporate standards of conduct. For example; breaching compliance rules or taking risks with the company’s or its clients’ money. However, it is in these circumstances that businesses need to take a firm line or risk facing public, regulatory and legal consequences.
All this represents an internal cultural shift that many employers will find challenging, particularly in difficult market conditions. As ever, the HR function will have a central role in guiding businesses through this change; devising and implementing the policies that will get them there. HR will also act as guardians of the ethical high ground, educating those within the organisation and ensuring that those who deserve a festive bonus get an early Christmas present.
Dan Peyton is an employment partner at international law firm McGuireWoods