Two major scandals raise fundamental questions about the role of performance-related pay.
First, last month Robert Francis QC published the report of the Mid Staffordshire NHS Foundation Trust public inquiry on the suffering of patients at Mid-Staffordshire hospital, with 290 recommendations to improve care and the ‘self-serving’ NHS. Health secretary Jeremy Hunt promised a tough new inspection regime, while prime minister David Cameron supported “pay linked to the quality of care, rather than just time-served”.
Second, following evidence of yet another mis-selling scandal over interest-rate swaps, new Barclays chief executive ofﬁcer Anthony Jenkins launched his strategic review.
In personally refusing to accept any bonus, Jenkins is putting his money where his mouth is. His counterpart at the Royal Bank of Scotland, Stephen Hester, also believes that “pay must be reﬂective of improvements in customer satisfaction and not just sales”.
Reforms in all the major banks since the ﬁnancial crash have seen a shift away from short-term cash bonuses, with deleveraging and bonus deferrals into share-based, longer-term incentive plans. But what about the direct sales staff responsible for the mis-selling?
Aon Hewitt’s UK sales compensation survey 2012/13, published in January 2013, found that the average on target pay mix for sales staff has moved down to 70% ﬁxed, 30% variable. A more incentive-aggressive 50:50 mix has been evident in ﬁnancial services.
But fewer than half of employers now cap sales staff earnings, down from 71% three years ago, and only 15% include measures of customer service in their plans. In the tough economic environment, sales still win out over service.
Although employers can stop pay plans directly incentivising the ‘wrong’ behaviours, these are never going to be at the core of the necessary organisational and cultural changes. They can, at best, reinforce better service and care. The same is true of tougher regulation: ultimately, you can’t force people to care for someone.
We need to look more broadly at the recruitment and development of customer/patient-facing staff, who want to serve and believe their organisation values such behaviour.
As Professor Michael West of the Centre for Performance-Led HR at Lancaster University Management School tweeted and Barclays’ Jenkins would support, rather than just bonus formulas, the equation we should look at is: leadership values=culture=focus of behaviour.
Follow Duncan Brown on Twitter: @duncanbHR