‘Greed Is Good’ – Remuneration, Motivation And Organisation

Remuneration, Motivation, and the Reality of Organizational Performance**

Introduction

During the 1980s, business culture—particularly in the United States—placed enormous emphasis on personal incentives and individual rewards. The dominant belief was that highly motivated, self-interested individuals could drive organizations and even entire communities toward success. This ideology was famously dramatized by Gordon Gekko in Wall Street, who boldly claimed that “Greed is good.”

For a time, remuneration-based motivation appeared to deliver impressive results. However, by the 1990s, many organizations learned—often painfully—that misaligned incentive systems could be just as destructive as they were motivating.

When Incentives Go Wrong

Several organizations collapsed or were severely damaged due to poorly designed reward structures. Companies such as Phones4U and Allied Dunbar in the financial services sector serve as cautionary tales. Perhaps the most infamous example is Barings Bank, where individual traders received millions in incentives while simultaneously pushing the organization toward long-term failure.

These cases revealed a critical flaw:
High individual motivation does not automatically translate into organizational success.

Even when incentives are based on apparently sound performance measures and individuals are rewarded accordingly, problems can still arise—especially when there is an excessive pay gap between senior executives and middle management. A reward system that motivates one employee but demoralizes ten others may ultimately weaken the organization rather than strengthen it.

Beyond Money: What Truly Motivates

Forward-thinking organizations recognize that sustainable success depends on motivating and rewarding all employees fairly, not just a select few. Employees must clearly understand:

• What they are being rewarded for, and
• How their daily actions contribute to those outcomes.

A wise organization understands that:

• Managers have a natural right to pursue their own interests.
• Managers work for people, not abstract entities, and therefore seek approval from superiors or peers.
• Managers prefer projects where success feels achievable—often favoring short-term wins over long-term objectives.

These realities mean that remuneration alone cannot shape behavior effectively. It must be supported by sound management and organizational systems.

Five Preconditions for an Effective Reward System

Before using remuneration to influence performance, organizations must establish a solid foundation. Five essential prerequisites stand out:

1. Measurement

“If you don’t measure it, you won’t achieve it.”
Performance must be measured using well-designed tools such as the Balanced Scorecard, which incorporates multiple objectives rather than focusing on a single metric.

2. Monitoring

Performance indicators must be monitored continuously—not just during annual reviews. Poor monitoring sends a dangerous signal that targets are optional or that collective failure is acceptable.

3. Control Over Job Tools

Employees should not be held accountable for outcomes that depend largely on factors beyond their control. The “how” matters as much as the “what.”

4. Consistency

Short-term pressures should not derail long-term objectives. Organizational structure—whether bureaucratic or flexible—must support the tasks managers are expected to perform.

5. Alignment of Reward and Strategy

Strategy development is a journey, not a one-time event. Even if strategy is evolving, reward systems can still function—provided conflicts are resolved using strategic clarity and balanced measurement systems.

Ten Characteristics of an Effective Remuneration System

Based on these five foundations, an effective reward structure must:

1. Support the organization’s overall strategy
2. Encourage desired behaviors
3. Reward appropriate performance
4. Be fair and reasonable
5. Be meaningful and substantial
6. Be tax-efficient
7. Be timely (close to the achievement)
8. Include non-monetary incentives (recognition matters)
9. Maintain discipline (missed bonuses should not be recoverable)
10. Be absolutely clear and transparent

Conclusion

The idea that “greed is good” may sound appealing in theory, but history shows that unchecked financial incentives can distort behavior, undermine teamwork, and destroy organizations. Sustainable performance is not driven by money alone—it emerges from alignment, fairness, clarity, and trust.

Ultimately, remuneration should be a tool, not a temptation. When balanced with sound strategy and thoughtful management, it can motivate excellence. When misused, it can do far more harm than good.