Expectation on our Reward leaders grows each year. At their performance apex, we see technical brilliance combining with an ability to inspire others; to lead teams, to sell ideas, to be commercially astute, to possess a connection with the business strategy of today and of tomorrow. None of these traits are easily acquired, and to see them in harmony is not commonplace.
I spend much of my working life assessing Reward talent, as well as working with Chief People Officers (CPOs) and business leaders to help build and promote the cultural value that Reward leaders can unlock for an organisation. Below, I briefly consider just two issues facing the boardroom today, and the evolving skill mix our Reward leaders will increasingly need to demonstrate in order to add value.
1 – Executive pay: influencing a longer-term view
Whilst technical excellence is a requirement of the Reward function, influencing future strategy is not. However, almost exactly 15 years since the collapse of Lehman Brothers on 15th September 2008, has the spotlight on executive pay softened? And could Reward leaders now act as critical levers to drive stronger cultural sustainability as we move towards 2024?
Executive pay remains the critical factor in the mistrust of corporates across the UK, presenting a significant challenge to HR and Reward leaders. There is much debate about how the rising pay of a CEO, set against a misfiring set of company results, breaks trust with employees, shareholders, and (speaking as a head-hunter) the external talent market. There will be data and logic to underpin the CEO’s upward pay, but the damage is done through perception.
Executive pay is highly complex. Public perception unfortunately ignores this point and, so too, the huge amount of high-quality work led by Reward which contributes to getting the very delicate pay balance right for the executive today.
When looking more closely this perception is enhanced through executive variable pay; focusing more on the relative short-term, which (it could be argued) will be good for the executive, not for the long-term sustainability of the company. All too often, annual bonus and share awards are linked strongly against performance measures and are typically only on a 1-to-3-year horizon.
Finding a great CEO is a terrific investment for any company and represents great value in the long term. The CEO’s variable pay should therefore gear accordingly, at a longer time horizon, demonstrating to stakeholders that they are motivated to act with a fair, focused, more purposeful mindset. To break this poor public perception, trust must be rebuilt through action. Action should (in part) take the form of a longer-term Reward share-based payouts and not cash-based incentives grounded on near term performance objectives. Put simply, if the executive succeeds when the company succeeds, trust will rise.
2 – Fairness in pay: influencing the rise of a fair focused culture.
Critically, there is a need for board accountability to be more visible when ensuring that pay fairness is both considered and then actually communicated. This communication must be transparent and seek full employee engagement. The rise of ESG reporting, and executive variable pay being linked to performance of ESG measures, should help to build more trust in corporate culture. However, various questions remain. Do employees really understand their company approach to fair pay? What is the company philosophy and set of principles on pay? Is this really known beyond the board room and a company’s Directors Remuneration Report (for those listed)?
As we know, pay equity goes beyond mere compliance with legal regulations; it embodies the principle of fairness and inclusivity within the workplace. It means that individuals performing substantially similar work, regardless of their gender, race, or other factors, should receive equal pay.
Achieving this equity is not just about eliminating wage gaps, but also about promoting a culture of equity, diversity and inclusion. And so, our Reward leaders must influence these connecting parts beyond pay and into corporate culture, via the HRLT and through papers, into the boardroom itself.
These two factors of longer-term outlook and commitment to fairness are now strategic imperatives and are no longer compliance issues.
Here are the skills that CPOs are increasingly telling our industry that they value (beyond technical accuracy) in their Reward leaders to help contribute to such an evolving landscape:
- Judgement of decision making – in the context of a broad set of variables.
- Ability to influence upwards.
- Quality of communications – across the whole organisation.
- Understanding of the Digital landscape.
The answer to the question “Can Reward leaders influence the drive for a more equitable corporate outlook?” is of course a resounding yes. It is, however, more of an ongoing question of how?
For me, (without in any way underestimating the need for brilliance with technical Reward execution), Reward leaders are increasingly demonstrating the commercial acumen and a behavioural skill set, more akin to CPO…and it is fascinating to watch the function evolve.
Get in touch with Toby to continue the conversation.
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