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Meritocracy without governance, results for whom?

By 10/05/2019 October 15th, 2019 No Comments

Thiago Labliuk (*)

I still believe this is one of the main tools to retain talents or to increase teams’ productivity. By definition, this term is related to the organization model and a reward system based on personal merits. Therefore, the background I’d like to be preceding this text regards the way this model is implemented and monitored, and how we can assess the risks it involves, in order to maximize the value added to all elements involved: shareholders, employees, and society.

Maybe the most common scenario is to think of meritocracy in the context of business, in which a professional has a varied income totally related to the sales volume. In other words, the more efficient is the sales process, the more returns to the employee. It is a fair Company-Employee relationship, because, as many agree, every strategy is developed by and depends on people.

Obviously, sales are normally highly related to the company’s strategies, and they need well-defined indicators (Risk and Performance) so we can have a controlled context to fairly award someone a bonus. Therefore, I highlight the need of a new Top-Down approach to a risk management program that is concerned, above all, about the business sustainability, which is superior to any personal concerns the meritocratic model ends up promoting.

A second context is related to departments (Back Office) that are not so directly involved to be adding value to the company, but certainly contribute to such process. Maybe this second context is the most complicated to establish a fair meritocracy program; so we are even more in need of an exhausting debate on companies’ strategy cascading and an analysis on “How” it shall be conducted.

After all, we know some sad examples of companies losing value for not having invested in important Compliance or Belt conveyor frameworks. Unfortunately, more often than not, we hear of variable compensation programs with target plans that do not highlight or assess the conflicts of interest, having no clear measurement criteria and lacking independence in resolution processes.

It would be no surprise to randomly find a target plan with the job description in its wording. In other words, is it meritocratic to do the least? To my mind, we can understand that, in the corporate world, Meritocracy is a very powerful tool to create value and high-performance teams.

However, we need to be careful of how the implementation goes and avoid “Superusers”, i.e., frameworks creating supply and demand for themselves that can be directed to personal interests, and refrain from repressing problems that make the results presented unsustainable, either because of oppression or encouragement of such perspective.

Finally, this is an issue with many underlying risks, but we have evidence of success factors that, when taken into account, can lead us to a winner model for value creation. In conclusion, reinforcing the background of this text, there was this one time I had the opportunity to watch a CEO presenting results from the last quarter, informing that, in the average, everyone exceeded the targets defined, but the company’s profit was lower than its peers’ and below the expected.

The highlights were on the following message: “Congratulations everyone for the individual results! You exceeded the targets! But now I have this awesome challenge to inform the shareholders the company didn’t reach the target they determined. I mean, how am I supposed to say we exceeded the targets?”

(*) – Head of Innovation and News Products in Bravo GRC.

Source: Empresa e Negócios newspaper

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