Managerial courage, a concept worth (re)defining, seems necessary when implementing a strategy of individual or incentive compensation for employees. Why and to what extent should managerial courage be shown when individualising remuneration? To answer this question, first of all we propose reviewing the notion of managerial courage and its role in incentive compensation.
What is managerial courage?
According to the philosopher E. Delassus, it is necessary to “question a number of preconceived ideas which often associate courage with unlimited power. Therefore, today, and especially if we talk about managerial courage, it is important to associate it with the notion of vulnerability. For a manager, being courageous means having the strength to accept your own vulnerability and supporting others in theirs.”
Managerial courage vs. authoritarianism: moving towards benevolent management
Socially, we tend to associate the term “courage” with the notion of power. According to the philosopher E. Delassus, courage, particularly in management, must be associated with a concept which is the opposite of power: vulnerability. Courage in this sense has nothing to do with authoritarianism. In fact, the opposite is true: as long as everyone is interdependent in a company, this dependence makes everyone vulnerable. For example, the good work done by a manager depends on the quality of the work done by their employees.
“Compared to an unconfident manager, a courageous manager is one who dares to communicate honestly and knows how to say no when they need to. They know how to be firm and make decisions without becoming tyrannical. These are qualities that often require a certain amount of boldness, both in the working world and your personal life,” explains an article on cadreo.com.
A courageous manager is a real asset, especially in managing challenging or strategic situations such as introducing and allocating incentive compensation.
“The authoritative manager is not an authoritarian manager, but someone others believe in and who believes in the ability of their team to carry out the tasks they have to accomplish,” says affirme Eric Delassus.
Courage, when linked to humility and objectivity, develops the critical spirit of managers, their self-analysis, producing benevolent and productive management where everyone wins out.
Managerial courage and incentive compensation: moving towards grateful management
Managerial courage is particularly apparent through companies’ remuneration system, more specifically through incentive compensation. It is a question of financially rewarding those who have performed well with a bonus that reflects the results achieved, without feeling obliged to offer this bonus to other employees who have not performed well. It is also a question of maintaining a certain fairness. This differentiation – which is also known as discriminatory without any pejorative connotation – keeps the most committed employees motivated. Recognising employees’ work is a means of making them committed and motivated. Recognising employees’ work and rewarding them for it also means greater involvement and long-term loyalty!
“Whatever the criteria chosen, the incentive compensation policy supports a company’s strategy. It rewards good behaviour, i.e. behaviour which allows the company to meet its key targets.” (Les Echos Buisness, 2018)
Individualisation of remuneration and managerial courage in practice
“Individualising salaries drives motivation and individual performance, which also affects the overall performance of a company. A sign of recognition at work, it involves remunerating employees according to their contribution to the company’s results, for instance by increasing the fixed component of their remuneration or by offering them a variable component depending on predefined criteria” – Cadre Emploi Article, 2019
The importance of not losing sight of the purpose of incentive compensation
Incentive compensation is essential, especially in a context where fixed salaries do not change or do not change enough. However, incentive compensation bonuses are sometimes wrongly used to compensate for a fixed salary which is too low. However, as mentioned above, these bonuses should be used to reward performance at work. If used in any other way, the main aim of the initiative is lost: to motivate employees.
It is therefore important to ensure that the fixed salary is commensurate with the skills and experience required and that the incentive compensation package is sufficient to reward employees for their individual performance to maintain their level of commitment,
which is necessary for the health of your business.
The variable compensation package offered should therefore never be too small and should represent at least one month’s salary as a target for each population. This is where you can really motivate employees to change their behaviour.
If the incentive compensation package is too small, you risk not being able to differentiate and therefore distributing small bonuses among everyone.
Managerial courage put to the test by bonus-related decision-making
As the Les Echos Business article reminds us, “When a department receives a performance-based bonus package, individual allocation is often at the manager’s discretion. In investment banks and consulting firms, March is the typical bonus month. Between the poorly rewarded students and those disappointed to find that these – hefty – bonuses are not only linked to performance but also depend on other criteria such as seniority, the practice causes some upheaval, even demotivation. This is where second-line managers need to be strategic and, in a way, courageous, by acting as a “safeguard.”
In this sense, another mistake to avoid, and which requires managerial courage, is thinking new recruits can’t be paid more than others. In reality, if the person employed has more experience and/or skills, it is reasonable to pay them more. An employee may have been in the job for a number of years but not have these assets despite their seniority. It is important to remember that fixed salaries correspond to the position held, the tasks carried out, the skills acquired and the level of experience in performing these tasks. If a new employee in a company outranks an older employee in these three areas, it is quite right that they should be paid more, whether or not they have recently joined the company.
Between strategic discretion and firm decision-making, managers must be able to show managerial courage while remaining authentic, consistent and caring with their teams.
What is the connection between management by objectives and the individualisation of remuneration?
Management by objectives (MBO) is a management strategy conceived in the 1960s which requires a certain amount of managerial courage. It concerns both qualitative and quantitative objectives. As the blog Réussir son Management (Successful Management) reminds us, this strategy gives employees “a clear idea of the impact of their work in terms of achieving the company’s objectives. This gives them a sense of belonging to the company, helping to increase productivity.” MBO specifically enables employees to improve their performance and develop their careers.
Managerial courage will be essential to the success of MBO. Managers should not hesitate to tell employees clearly what is expected of them and what is involved, especially when there will be no reward linked to individual performance. And if a company decides to use incentive compensation, it must differentiate between employees. Managerial courage will again be required to set targets of a different nature and degree for each individual, but
with the same level of challenge.
In the banking sector, several evaluation criteria exist. MBO is applied with quantitative and qualitative criteria. The items defined tend to establish the quality of an employee’s work. It should be noted, however, that in some banks the score obtained through this evaluation system does not determine the level of bonuses, which should be the case.
Managerial courage does not mean authoritarianism or power. Managers must be able to show benevolence but also transparency and firmness. This is especially true for incentive compensation, or the individualisation of remuneration linked to individual performance. Showing managerial courage is an integral part of a fair and truly effective incentive compensation strategy.
