Wrong Decisions - Wrong Rewards

12 Mar 2020 11:31 PM | John Heap (Administrator)

We should be able to assume that most business leaders are aiming to improve the productivity and performance of their organisation.  Yet, not many of them seem to be successful in doing this. This suggests these leaders are doing the wrong things or not doing the right things correctly.


I think many of therm have an incomplete or erroneous view of what drives productivity - especially over the longer-term.


For example, many use cost-cutting to drive profits up .... but they cut those elements that drive productivity growth - like skilled workers.  Using low-skilled, cheap labour might raise profits in this quarter (and earn the leader a bonus) but it damages the fabric of the organisation and lowers its longer-term potential.


And, generally, low-skilled labour is less likely to engage in cultural shifts to support continuous improvement and employee-led problem solving.


Actually, in those statements lie another major problem - reward systems for senior executives. If their remit is long-term strategy, their rewards must be calculated on long-term performance, not short-term profits.


Shareholders need to make business leaders accountable for longer-term decisions and results.




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