Why living values must be rewarded

Many argue that companies suffering from ethical breakdowns had failed to effectively communicate their corporate values. However, even communicating values works like nailing jelly to the wall, unless living them is rewarded.

In continuous push for growth, leaders in performance-oriented organisations expect a relentless drive for results. To orchestrate ambitions, they have established sophisticated performance management processes with robust means to define, measure and reward results. However, many of the same organisations have been sloppy in defining, measuring and rewarding how this performance should be achieved, leaving employees pushed to cut corners when faced with pressures or seductions.

Leaders are quick to claim that rewarding adherence to values is absurd; why reward something that is simply expected? Company values prominently placed on the wall at corporate headquarters already define how to behave and the Code of Conduct sets the limits. Moreover, values are too subjective and impossible to measure. So it goes. Well, performance-driven organisations already do reward what is expected: leaders are rewarded for leading, researchers for researching and sales people for selling. In the end, an organisation rewards what it believes is important. Therefore, if it strives to have employees live its values, it must reward it.

The solution to responsible performance is a two-dimensional reward system, which measures the achievement of business objectives against adherence to company values with direct impact on bonus payout and career potential. Objectives must be attainable while living company values as pressures to perform due to unachievable, short-term targets lead production-line workers to look away on quality issues, bankers to sell junk, researchers to fabricate results, and sales people to fix prices with competitors. It is therefore important to define how objectives are to be achieved, to ensure they are not met at all costs in an endless quest to keep a job or reap rewards. As an example, an employee may have an objective to ‘improve profitability’, with a measurable target of, say, 5%. Likewise, the company may define ‘demonstrate ethical conduct’ as a measurable behaviour, derived from its value of integrity.

The performance can thereby be measured on both what and how dimensions. An employee may demonstrate during performance discussions, supported by peer feedback, that he met the profitability objective. Similarly, he argues that he has delivered on the behavioural expectation of the ‘integrity’ value having, say, terminated dealings with a corrupt third party (the measurable behaviour) despite pressures to keep the profitable relationship. Hence, the two-dimensional reward system would rectify a situation where, as an example, a greater 20% profitability could have been achieved through dealings with the corrupt third party (or through Libor or emission manipulation), as it would result in a poor performance rating and loss of bonus. With its transparent focus on both what is achieved and how, the two-dimensional reward system brings business conduct in line with company values.

Leaders in companies ask themselves why some employees cross the line despitevalues being communicated left, right and centre. Well, unless they reward not only what is achieved but also how, companies will continue to make front-page news for the wrong reasons. In today’s cutthroat competitive environment, rewarding howperformance is achieved is not absurd - it is a must for performance-driven organisations striving to be sustainable.