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63. Frederick Herzberg and executive pay – and MPs expenses!

My last post on Frederick Herzberg’s theory of motivation has given rise to a few thoughts in relation to the recent hot topics of pay and expenses. Just to remind you, Herzberg’s research identified that pay is what he called a ‘hygeine’ factor: if it is not adequate it will cause dissatisfaction but it is not a factor which will rarely motivate to improved performance. Motivating factors are usually associated with the satisfaction of the work itself, achievement, recognition, responsibility, advancement and the individual’s personal growth.

In this context it was interesting listening to the Chief Executive of Network Rail  on Radio 4 some time ago agreeing to forgo his bonus, but justifying the need to pay high bonuses to his staff, and presumably himself, on the grounds of the need to motivate. So has he not heard of Herzberg, or does he disagree with what is recognised as a generally validated motivational theory?

Of course, he may be working on an alternative theory that, although itself not a motivator, money in very large quantities (with a little natural greed thrown in) and associated with specific targets will focus an individual’s activities on those very specific targets at the expense of everything else. They will tend to get them achieved. However, the corrollary of this is that the overall responsibility of the job, the interests of all stakeholders, the long-term interests that should be the focus of all senior management, will be neglected in the interests of a few short-term goals. (Do I hear the words ’cause of the banking crisis’ whispered here?)

The fact is that these bonuses are nothing to do with motivation, but have become VERY expensive hygiene factors – no senior manager in a large corporation will consider himself valued if he does not have access to this ‘gravy-train’. And this culture has spread to the public sector, and is in danger of percolating further down- to the extent that a news bulletin reported a school Head as suspended for arranging to pay himself a bonus to which, of course, he had no entitlement. This could possibly be regarded as fraud.

This brings us to our MPs! Allegedly the activities of some amount to blatant fraud. Others are exploiting the letter but not the (written and instructed) spirit of the rules. But some have come out of this as incredibly moral people who have resisted the temptation spread before them. We should value these people dearly and not forget them in the focus on the worst.

I am disgusted as many are at what has happened, but also have some sympathy with them, working in a system which has been corrupted. Faced with the choice of keeping to the principles which they may have had, but at the expense of ‘losing out’ and being ‘taken for an idiot’ – they have compromised those principles and become lesser people – richer financially but poorer personally for it.

MPs have difficult job, but not one that carries individually a great deal of responsibility. But they tend to mix with the wealthy, the powerful and the highly paid. They can feel that they are undervalued by comparison, and is that a factor in the readiness of many to try to exploit the expenses system? Sometimes it is difficult to resist this insidious temptation. (By the way, why so much heartache over who should now ensure that the new rules are policed – what is wrong with HMRC which does the job for the rest of us?).

So what’s today’s lessons for small businesses?

  1. Beware of setting up schemes which encourage corruption – if staff do not think they are treated fairly they can feel justified in helping themselves. 
  2. Beware of the law of unintended consequences of any incentive scheme
  3. Be aware of what hygiene factors you need to address to attract and keep good people but also be aware of what really motivates when you want to get your people working with you to achieve the best long-term result for your business
  4. Be aware of your own motivation and how others and yourself can easily become poorer people in the pursuit of greater wealth! If you run a good business, hopefully the wealth will follow.