Strategy & Operations » Leadership & Management » Time to re-think our bonus schemes

BONUSES have been on and off the news agenda since the economic crash, add to that bankers bonuses causing distrust within the financial sector and it is clear a reassessment of how we reward within an organisation is needed. The latest news that Fred Goodwin, former CEO at RBS has had his knighthood stripped takes the concern over bonuses out of the corporate world and onto the national agenda.

At the moment it seems unclear what bonuses are being judged on? It is this lack of transparency which causes such a public backlash. The ‘old school’ bonus method within larger corporations needs an overhaul which appeals to a generation who place job security, sustainability and ability to grow internally above titles and grandiosity.

The government has recently praised John Lewis for its performance during a troubled economy. Deputy prime minister Nick Clegg stated “Britain should develop more of a John Lewis economy” in a recent speech. John Lewis is a company without shareholders, its value is vested in a Trust that can only be shared between the company’s employees. This corporate structure has resulted in a higher sense of connectivity and led to high street success while other retailers suffered and fell. This success proves that having an engaged workforce doesn’t make them just a happy one but also a profitable one.

By rewarding employees for their environmental actions through bonuses, public recognition, and through starting employee-inspired and supporter initiatives, companies are more in tune with the backbone of their workforce. By having the ability to truly measure an employee’s impact within an organisation bonuses can be fairly benchmarked while generating significant cost savings.

For example by aligning and engaging with its employees one of our customers, an organisation with 6,000 staff and an annual travel expense cost of $24m saw a 25% reduction in taxi use, 15% reduction in mileage claims and a 7% reduction in flights which in turn led to 10% reduction in annual carbon footprint, 9% reduction in annual expense costs and a total of 27,000 hours spent working rather than travelling. This directly creates cost savings and can be traced down to an individual employee. Each team, or floor, can be encouraged to provide information on how much waste they recycle, whether they switch off lights and computers or to participate in a video conference as opposed to hopping on a train.

Employee engagement is all too often a ‘management by poster slogan’ but the financial case for a driven workforce speaks volumes. Rewarding ‘green bonuses’ to high performing staff is already gaining ground as companies turn their back on the traditional approach of linking bonuses to profits. For example, TNT has rolled out a sustainability-linked scheme. While all 600 executives at AkzoNobel, a Dutch company, will only receive bonuses based on how much they have contributed towards reducing injuries among staff and cutting carbon, energy, water and waste. As usual the UK seems to be lagging behind the rest of Europe but with big brand companies such as John Lewis showing that an engaged workforce is key to success, a bottom up approach makes financial sense.

Peter Grant is CEO of CloudApps

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