In December “A box of Birds” by Charles Fernyhough was published. I was particularly interested as I was one of about three hundred people who had “crowd funded” the publication of this book. Fernyhough got his book published and I got a signed first edition. I was speculating if this new economic model could be extended to Reward? Executive remuneration is supposed to be crowd decided by shareholders via the Remuneration Committee. It is a model that does not currently seem to work as well as it could; although this has far more to do with the increasing number of stakeholders, such as shareholder advocacy groups and politicians who all feel they should be part of the crowd sourced decision making. It may be a way forward, but there will be a lot of pain before the model works in a way that is less combative and better at producing “good” outcomes.
The growth of social media, social networks and crowd sourcing are all going to impact on reward, often in an indirect way. Not being part of strong, extensive, international social networks will leave us marginalised bit players in 2013. Reward professionals need to be leading the way as opinion formers in our sphere and the best way to do that is through the propagation of good practice through social media conduits. Combinations of existing and new technology are going to take us by surprise in 2013; we must work hard to be in the vanguard of change rather than following up in the rear echelon.
Many of the other issues facing us in 2013 are spawned by the poor economy both in the UK and worldwide. The platoons of economists tend to skirmish over the fate of inflation in 2013; but if I was a betting man I would be look for odds on an outbreak of inflation. This gives special challenges to reward, given low growth and even lower budgets how can we marshal our pay resources to give the biggest bang for our buck? This is at a time when real living standards have been in retreat for the better part of five years, if not longer. Non-cash rewards and recognition activity continue to grow in importance in such a milieu. However, addressing the core issue of falling living standards is more than just an economic question; failure risks further collateral damage to our social cohesion.
In 2013 the differences between rich and poor will again be greater and more visible. We have already seen the outward manifestation of the damage to social capital by way of riots on our streets, greatly reduced political legitimacy by way of very low turnouts, for example in the election for police commissioners and greater apathy if not hostility towards politicians; seeing Osborn being booed at the Olympics is a demonstration of the depth of ill feeling. I still remember studying sociology in the 1980’s – Emilie Durkheim talked of anomie, a social condition characterized by instability, the breakdown of social norms, institutional disorganization, and a divorce between socially valid goals and available means for achieving them. We in Reward must look to reflect societal concerns as we scan the battlefield for threats if we are to add value to the current debates.
Issues around high pay and executive reward will continue to drive our and the business media agenda this year. We are seeing attempts to make reward as much about how results are achieved as what those results are. However, arguably not only is it too little too late (at least for investment banking pay) but it does not address the issue of “fairness” in pay; be it from the viewpoint of the shareholder, who provides the capital, or the employee who provides the effort. Least of all it does not address the media sniping and politics of envy. Increased transparency will be a loud demand on executive pay in 2013; although as US reporting has shown more does not mean better. Executive pay is too complex and subject to too many variables to be reduced to one or two easy numbers. (Vince Cable, please take note). One of my New Year wishes is that we could find a way to define what really is meant by “fair” pay.
Another challenge facing us due to the economy is that of the apparent changes in employment structures. I, like many others, am seeking a full-time permanent role. But, organisations responses to the current depressed labour market are, understandably, to regroup by using more temporary and contract roles. Pay levels in the market have been depressed. With, on average, seventeen people in the UK chasing every vacancy, new roles are being advertised with lower levels of starting pay. Bath University has produced some excellent work on organisational engagement and I find it interesting to ponder how companies encourage engagement while downsizing their permanent employees and employing far more casual labour in the fight for cost advantage. The Bath study showed a strong correlation between commitment levels and long term organisational economic success. This competitive advantage is in retreat when faced with the economics of 2013
I do hope that 2013 will be better than I expect, many of the issues discussed above can be seen as opportunities and challenges where innovative practice and creative solutions in UK and global reward will allow us to bring light to the darkness of incipient anomie. I wish all of you a happy and prosperous 2013.