Let’s Talk Reward

What would it be like if Donald Trump was your Reward Director?

Instead of jumping on the Brexit bandwagon or talking about market uncertainties and the potential recruitment impact of the US elections I decided to adopt a different approach to my latest blog.   Campaigning has been the constant theme of 2016.  Everyday watching the evening news, there has inevitably been a focus on either the US primaries and nominations, or the “Stay” and “Leave” campaigns touting their latest arguments.  I feel like I have been sheep dipped in negative rhetoric for around six months, with individuals taking to various platforms offering doomsday scenarios or radical approaches in order to change the status quo.  Mr Trump has seemingly tapped into the psyche of Middle America and played on the popular fears and frustrations, created scapegoats, and offered up radical/ nonsensical ideas to “make America great again”.    I have been intrigued at how words of mainly negativity have inspired such a huge response and it’s clear that the US election will be a historic battle come the autumn.  However, it did get me thinking about how this type of bullish and dramatic approach would pan out in the world of reward.

In the UK since the recession, Reward has worked tirelessly to not rock the boat.  Performance related pay, curbing excessive pay, bonus caps, achieving 90%+ shareholder approval votes on DRR’s are key components of any Reward Director remit.  In turn we therefore rarely see a reward firebrand going to market with something daring, unique, or proposing a strategy that actually challenges the norm.  So what would happen if someone stood up and went against the grain and tried to tap into the employee psyche and offer up something truly disruptive?  What would happen if you employed an individual with Trumpesque tendencies to lead your Reward agenda?

 

  1. You would challenge and subsequently scrap the whole concept of the bonus payment.

Trump has not hidden away from his thoughts on excessive pay, again tapping into the anti-banking sentiment.  Indeed this is likely to form a huge part of his campaign against Hilary Clinton, whilst he paints her as “Bestie” of the Wall Street titans.  As your Reward Director, Trump would immediately question the whole concept of bonus payments and whether they promote the right behaviours within business.  He would therefore propose either a switch of the pay mix between fixed and variable pay, dropping variable pay to more of a token gesture rather than core component of your total compensation.  Or he would scrap the whole concept of the bonus payment across the majority of employees and replace this with slight increased fixed pay, small spot incentives for revenue generators and an executive pay structure that purely rewarded significant company performance.  Inevitably he would do this with a certain amount of theatrical flair, by storming into his first RemCo, burning a copy of the previous DRR, ninja kicking the chair of RemCo and slamming fists on the board table whilst chanting “No Bonuses”.  There would be an entourage of people wearing printed T-Shirts with the same “No Bonuses” slogan and the whole thing would be fitfully accompanied to music with Bruce Springsteen’s “Born in the USA”.

 

Joking aside, a bullish approach to bonuses is something that some organisations are now taking and therefore the “Trump approach” may not be so outlandish. Several Swedish Banks including Swedbank, Handelsbanken, and SEB have either scrapped bonus payments entirely for nearly all staff or changed the nature of their reward model to make the bonus a minor element.  One of the top UK Headquartered banks have notably switched their mix of individual fixed/ variable pay to a 60:40 maximum split, completely changing the whole concept of the bonus at the bank.   With all these institutions the consequences of taking a reward risk appear to have been relatively minimal.  We haven’t seen a huge exodus of staff heading for the door citing poor variable pay as the driver to leave, equally we haven’t seen public or shareholder backlash of any scale on these radical ideas. Perhaps when tackling the thorny issue of variable pay, Reward could be a bit more Trumpish?

 

  1. You would completely separate HR and Reward into two separate departments

People are starting to already comment on the potential messy divorce facing HR and Reward departments.  Within financial services organisations, we are already seeing Reward departments increasingly operate in the space between finance, compliance, risk, and HR.  Remuneration regulation has changed the nature of the reward making it difficult to really align your remuneration approach with the wider people agenda.  Facing increasing constraints several banks have already started to change the reporting line of the Reward Director to now be accountable to the CEO/ CFO as opposed to the HR Director or promoting the Reward Director to the same level as the HR Director.  The Reward department is increasingly the centre point for people related decisions so rather than Reward building its approach around the wider HR Strategy, realistically some would argue that HR now has to build is agenda around the reward landscape.  With Trump at the helm of a Reward function, surely the split would only be a matter of time?  This would happen quickly and no doubt publicly; maybe orchestrated as some sort of Pit fighting contest between the HR Director and Reward Director with a winner takes all approach?  Again, this would probably need musical accompaniment, perhaps the scene in Gladiator where Maximus took on Commodus in the Coliseum?

 

  1. The approach to the Gender Pay Gap would be controversial.

Mr Trump’s spectacular alienation of the Female voting population in the US should pretty much answer the question of how he would approach the Gender Pay Gap.  However what we are trying to ascertain is how someone with a Trumpesque style to reward would take a radical approach to this issue? Within the US the Gender Pay Gap is so pronounced and currently a female earns 82-83% as much per year compared to a male counterpart.  So no doubt creating a sensationalist headline grabbing approach to Gender Pay would be the way forward if Trump was your Reward Director.  My sense is that he would likely take an aggressive stance and instead of reducing or eliminating the gap, he would more than likely take it to the other extreme of increasing fixed pay annually for female staff above that of their male counterparts.  Following this he would then lower performance criteria on variable pay for female part time/ flexible workers as opposed to full time female and male counterparts.  He would wade in with complete pay transparency across the organisation, regardless of the headache for line managers and then shrink salary bands down or eliminate them altogether, which can actually often be a big reason for pay disparity.  Additionally, he would take this further by really pushing hard on some of the root causes behind the Gender Pay Gap.   He would offer notably enhanced childcare allowances, particularly for parents with more than one child to remove any financial obstacles on returning to work. He would allow parents who want to return to work quickly a genuine financial lifeline to minimise their time away from the workplace, or he would offer 12 months full paid maternity.

My sense is that he would take this to the extreme of active discrimination in some cases and create more workplace unrest as a result of trying to solve a problem quickly.  Organisations tackling the Gender Pay Gap are taking positive steps in addressing this publicly, but merely announcing your own Gender Pay statistics in a sort of cathartic naming and shaming exercise isn’t actually taking an active step to address the issue.  There are some systemic causes to Gender Pay that are wider UK business issues that need to be addressed rather than individual companies attempting to solve the problem, and until this happens a Trump approach to the issue could open a whole can of worms.

 

  1. Your Reward Budget would go through the roof and the salary and benefits spend would become unmanageable.

The final point I wanted to make touches upon Mr Trump’s ability to shoot from the hip, rather than taking a considered approach.  Whilst politically this causes a couple of days of amusing headlines, (The 7-Eleven / 9/11 mix up was my personal favourite) the damage caused through an ill thought out Reward Strategy can be catastrophic.

Reward now is often charged with maintaining employee engagement, attracting talent and retaining staff across the workplace. With talent shortages, rising salaries and increasing regulation Reward professionals are being tasked with coming up with innovative solutions whilst having one hand technically tied behind their back.   Line Managers, CEO’s, and frustrated stakeholders are asking for ideas and ways to keep core talent and the glaring and easy solution for Reward professionals is staring them in the face…. Give them more money!  Increasing salaries, offering high end benefits and flexible and remote working options are the easiest way to solve an issue, but are often a slippery slope to head down.  Increasing your fixed costs and lowering your profits and by default your shareholder return is never going to go down well, ultimately is unsustainable.  I have no doubt a Trump approach of “give them what they want” would be popular amongst staff in the short term but would lead to wider problems when you then have reduce headcount due to cost constraints.

Reward often has to tread the fine line between managing salary and bonus costs, whilst ensuring your staff feel fairly paid.  You can’t approach this recklessly or with a quick fix strategy. Ultimately it is a game for thinkers rather than sensationalists and this is where the Trump reward approach would ultimately fall apart.  Appealing to popularist sentiment or playing on the grumbles and frustrations of your main employee base may garner you internal praise and recognition in the short term but ultimately it’s a reward approach built on sand.

 

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