UPFRONT Return and reward

Performance-based remuneration, long held as motivator to increased productivity and company profitability, can be the piece of corporate kindness that kills the enterprise according to the woman who blew the whistle on corruption in American corporation Enron.
Lynn Brewer, speaking at last October’s NZIM International Leadership Summit in Auckland, said corruption within major organisations occurs where it can most easily be covered up – in the ranks of middle management rather than at the top.
Middle managers feel the most pressure to perform financially. That, says Brewer, is where the real pressure is exerted and where major judgement calls are made, often without reference to either company policy or the appropriate company hierarchy.
Brewer’s personal experiences at Enron and her subsequent study of other enterprises showed that where personal financial gain was involved, middle managers were more likely to act in their own interests rather than those of the enterprise.
“They may try to justify their actions as being for the greater good but they rarely are, particularly if performance-based remuneration is involved,” she said.
Brewer reported incidents of fraud, sabotage and false financial reporting to her superiors at Enron on five different occasions. Each time she was ‘rewarded’ with promotion away from the scene of the crime.
Where performance-based pay is involved, managers that can are more likely to take ‘shortcuts’ to achieve productivity or profitability increases and are more likely to cover them up if suspected or challenged on them. This, says Brewer, is where the culture of an organisation can turn for the worse if appropriate checks and balances are not in place and monitored.

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