Comprehensive Spending Review undermines ‘fair’ incentives…

The Coalition’s Government’s comprehensive spending review has been announced. As always there are winners and losers but amongst it all the Government insists  that every measure is underpinned by the principle of fairness. Whether it’s a ‘future fair for all’ or a ‘fair deal for all taxpayers’, it’s clear that politicians are appealing to the British people’s sense of what’s right and innate ‘fairness’ to engage the public and generate support. But what is fairness?

 Surely to be fair, or advantageous, to one group, means being unfair to another? The announcement that Child Benefit will be withdrawn from those earning over £43,000, but still received by couples who between them earn £80,000, is a case in point.  Why was such an ostensibly unfair approach adopted? Whether or not you agree with the decision I can clearly see the rationale. It’s all down to finite resources, and who hasn’t faced that dilemma? The resources  required to implement a fairer approach to child benefit payments far outweigh the benefits.

 But it’s not just the Government that has to make tough decisions. When discussing incentive scheme structures with organisations I’m often amazed that  people who are normally highly logical suddenly suffer from a collective myopia. They lose sight of the overall objective under the weight of equal opportunity and fairness. They seek to put so many levels, disclaimers and low level opportunities within a scheme that it becomes confusing at best, & de-motivational at worst. Then they wonder why it hasn’t worked. Participant’s either don’t read the scheme details or even think that the organisation is somehow trying to disguise the effort required for each reward.

 An incentive is, by its very nature, selective. Your strategy is to identify better performers and to motivate increased discretionary effort to meet objectives: for example to drive sales, increase customer service or encourage quicker responses. Surely if we are being fair to top performers and rewarding them for the extra business they bring in, then we’re being unfair to others?

 If you include bands of performance in your structure, how can you be fair to those who will just miss out? If you provide a target then how are you fair when some participant’s end up having softer targets? How are you fair to participant’s who move roles, or work a slightly different mix of products, or work different territories? My advice? Don’t be frightened to use your resources effectively. Keep it simple, create something that works cost effectively for the majority and provide some scope for amending terms and conditions later. Concentrate your budget on rewarding people, not on complicated reporting that then necessitates additional communications and drains your resource, either internally or in agency fees, for little additional impact. Refer every change back to the original objective and decide on its impact: both positive and negative. So it seems that a valuable lesson can be learnt from the Coalition Government; not ‘fairness for all’, but focus on the result rather than the means.

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