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September 2009
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 Following the near collapse of our banking system there was a lot of talk in the
media and amongst politicians for the need for a move away from the bonus culture
and short termism in business towards a system that rewards long-term performance.
So, I was interested to see recently that Victor Blank, the Chairman of Lloyds Banking
Group has been effectively forced to stand down by disgruntled shareholders.
As a shareholder myself, I understand the frustration – the value of Lloyds shares
plummeted following the takeover of HBOS.
The problem is that it now looks like HBOS was in a bigger mess than anyone realised,
and that Lloyds may have overpaid for it. At the time of the takeover though, a
lot of people were suggesting that Lloyds had gotten too good a deal and that HBOS
had been given away.
The fact is that we probably won’t know just how good, or bad, a deal the takeover
by Lloyds TSB of HBOS was for several years yet. It’s worth pointing out though,
that going into the financial services meltdown, Lloyds TSB appeared to be close to smelling of roses. And, as Robert Peston, the BBC Business Editor, points out,
in a market with less competition, Lloyds Banking Group is set to become a real
giant in the financial services market. But, it looks like the markets (wasn’t it
the markets that got us into the mess in the first place) weren’t prepared to
wait.
My worry is that, as a country, we’re still focusing on short-term success and today’s
profits. And my question is, looking closer to home, how can we manage our people
so that we reward them for long-term performance, rather than short-term?
It’s a real challenge for business leaders, managers and trainers and there are
no easy answers. But it’s more than a dozen years since Kaplan started publicising
the Balanced Business Scorecard, and I think we still have a lot to learn from applying
a more balanced approach to managing business strategy.
We’re not perfect, but at Glasstap we do give equal weight, when it comes to our
strategy and performance rewards, to each of our five passions: Customer Focus,
Innovation, Team Spirit, Financial Strength and Social Responsibility. This really does mean that in order to achieve the maximum bonus possible (yes we do have a
bonus culture and we’re not ashamed of it) team members must deliver in all five
areas.
Now, you might argue that you need to focus on financial performance in order to
be able to deliver the other things like social responsibility and customer focus.
To that, I’d point out that all five of our passions are interdependent and that
by giving equal weight to all of our passions, we’ve seen profits grow in 2008 and
2009.
A lot of organisations pay lip service to the Balanced Business Scorecard but when
it comes to rewarding staff how many managers are totting up the pounds without
thinking about the foundations put in place in the past (perhaps by others) that
has delivered those financial benefits today?
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