Nations prosper when every one, including the poor, believe that they will profit fairly from investment and growth. When people believe that the spoils of prosperity are unequally and unfairly distributed, they disengage from development and self-reliance, according to a recent article in the New York Times. Greater income gaps are often a symptom of a broader problem with cultural inequity.
For those of us living in developed Western nations, income gaps are increasing and are increasingly differentiating the working class and middle class professionals. Access to health care and education are particularly influenced by socio-economic status. The U.S. vaunted upward social mobility is now just a myth. If the research is correct, this will likely lead to reduced prosperity. Not a pretty picture.
So why does this matter to business leaders? Part of strategic leadership is the acquisition, development and retention of human capital (or people, as I like to call them). If people feel that the benefits of their work go disproportionately to others in an organization they will be de-motivated. As a result, the design of remuneration and reward and recognition programs are essential to effectively delivering on an organization’s strategy. Paul Marciano, in the Monster Inc Blog talks about ineffective reward and recognition programs:
Imagine fitting employees into one of three buckets: Top performers, average performers and poor performers. Now, when you put a program into place, who wins? The top performers! What is the impact on the poor performers? None or negative; the program is just another example of their “loser” status in your organization.
Even worse, often these programs are not well designed and reward bad behaviour or the boss’ favourite person. So employees feel that the deck is stacked against them, there is no way they are going to get a fair shake from the system. The same goes for “high potential” leadership development programs and other types of programs designed to separate the “stars” from the “average” employee.
As Henry Mintzberg noted, creating categories like “stars” and all others, “we demote” everyone else, and discourage community, collaboration and engagement.
Rather than rewarding individual performance, creating huge financial rewards for a small few, leaders need to think about how to engage all organizational citizens, ensuring that everyone gets a piece of increased prosperity, not just a select few.