“We must create a level playing field.”
Is a key and noble ideal in society but does it really work for the finance & accounting team?
In this bite-sized episode I share some research I did into meritocracies as part of trying to develop a better rewards system in my team and perhaps some ideas that might work as an alternative given the nature of the work we do as finance professionals.
Andrew: [00:00:00] Hi everyone. And welcome to this week’s strength in the numbers and this week might be a bit of a left field one, but I was having an interesting conversation with some people, some finance colleagues around whether our finance and accounting team should adopt more of a meritocracy type mindset.
[00:00:16] And it’s not a new idea. Although the word was only coined in the 1950s, it does have its origins back in sixth century, BC ancient, China Confucius, who said to have invented the idea of it had this notion that those who should be governing or during the governing should be doing so because of merit, not because of any inherited status.
[00:00:39] I given that we as finance professionals, Have a key role in the governance processes within an organization, is meritocracy all it’s cracked up to be, and should we be actively trying to pursue it ourselves? And why not? Meritocracy is a very much upheld social ideal. A lot of politicians doesn’t matter what their leanings are tended to Revere this idea that.
[00:01:05] The rewards in life, whether it be money, happiness, power jobs, getting to college should be distribution, according to skill and effort. And you might’ve heard of this metaphor, an even playing field. That sort of fits with these ideals of meritocracy. In fact, Donald Trump used it in his inaugural addresses us president.
[00:01:27]And whether it’s filling positions in government or business, or even when our organizations are making decisions on where to allocate capital, that we might get involved in to go do the due diligence around making sure to being put in the most, in the right place, in the optimal way. It’s certainly believed there’s this universal remedy to, discrimination, favoritism, nepotism, cronyism.
[00:01:51] Yeah on getting unfairly the spoils of any system. Coming back to this idea of meritocracy, right?
[00:01:58]It actually came out of a fictional satire that was based on a society in the future. That was organized. Originally, according to a formula, merit is equals IQ plus effort. And what ended up happening is this meritocracy ended up being ruled by distant and heartless elite, who felt that they deserved their positions in society because of their efforts and their IQ, as opposed to things like lock or the misfortune of other groups.
[00:02:29] And it was so oppressive that it led to the uprising. A lot populous movement led by some elite women who overthrew the meritocracy. I thought it was quite funny, because as much as this was meant to be about a future fictional society, you might see some parallels. If you read one of the latest reports out of the United nations world social report, it’s a, it’s analyzed growing an inequality.
[00:02:54] Apparently 70% of the global population is suffering from growing inequality. And that unfortunately increases the risks of division. And hampers further economic and social development across the world. And it’s a bit unfortunate, particularly as I was saying last week, show that a lot more of our is likely to grow with, along with the populations of Southeast Asia and Africa.
[00:03:19]So let’s think about financing, sell for a minute and go back to that. Should we be applying these meritocratic ideals in finance and accounting given the importance of governing in the right way. And some of you might be thinking well, okay, you can go and do that, Andrew. But then how would you define what the merits meant to be the outcomes?
[00:03:40] How do you find objective criteria by which to measure those? And you’ve already said it, but how do you account for luck or misfortune? Just been businesses within the last year that a very well known that all of a sudden, because of some events that are outside of their control, have done extremely well and others that perhaps haven’t done so well.
[00:04:01] And we’ve probably all been part of a finance team where we’ve suffered some sort of misfortune normally at the time you’d least prefer it, or it could be a quarter-end close or something. But the key data aren’t available or something’s broken, or IT might’ve accidentally deleted a shared folder and yes, that has happened.
[00:04:17]So you can’t go close the books on time and last got load of a knock-on implications for the organizations we go and support. And again, how could we objectively assess the impact of that on the outcomes we were delivering?
[00:04:32]And during my conversations, I got to speak to a very high performing finance colleague, a very talented person. And he was recounting a story of when he had his first experience in finance and joined an organization, which had his bonus pulled aside on the principles of meritocracy. And that meant that the top performers got 120% of the pool.
[00:04:55]Relatively speaking to their role. And then the bottom performers all got 80%. And what he found was when he joined the team, he obviously wanted to learn from the top performers. So it went to speak to them and they wouldn’t give him an ounce of their time. And that was, he put down to the fact that they were too busy, trying to.
[00:05:13]To invest in themselves to care about other people, because if they put their efforts into other people, it’d be taking away from what they could deliver via their hard work and efforts themselves. And then so trying to learn the systems and how things are done around there, you went to speak to the other cohort that didn’t perhaps perform as at the higher levels.
[00:05:34]And he found that they didn’t want to speak to him because they were a bit demoralized, but disengaged. They were upset that they were placed lower down in the pecking order, and I suppose that is probably one of the main drawbacks that research has thrown when we’re showing up with meritocracies is that it tends to lead to a bit more selfishness a little bit more hoarding
[00:05:55]and disengagement. Okay. So what if meritocracy is probably not all it’s cracked up to be, but pain people all the same. It doesn’t really seem fair either. What can we do? I actually found it really hard to find some alternatives on the internet anyway and talking around as well.
[00:06:11] But there was one I did come across that I haven’t tried out myself, but I probably am going to give it a shot anywhere at least to see what the results are. And it goes back to a concept or philosophy developed by Tawny which place the concept of the function at the heart of his vision. Where the function serves as the moral standard to whole capitalism to account. As well as an organizing principle around societies. And I was just thinking if you supply something like that to finance, while in finance, we’re there to hold management to account on behalf of shareholders in the board.
[00:06:44] We’re there to use it as a way of maybe organizing decisions. So it might actually have some legs, perhaps when we try it out, I’d also to borrow more of a modern term for, and David civil. It’s actually coined it, Functiocracy and the formula behind it, the social need plus democracy is equal to function and I’m thinking well in our world that social needs would be defined as something like improved collaboration, winning together timely, accurate reporting.
[00:07:14]But whatever it’s defined as I’ve only got ideas, it needs to be elected as the functions that we’re meant to perform. So it needs to be, people need to come together and agree that is how it’s measured. And there’s a big assumption. You can get people to agree or probably might need some sort of voting system or prioritization system we need to come up with.
[00:07:35] And then in the case of the individuals that then reward it based on their contribution towards helping the team flourish towards its function. And I believe then to do that, we’d have to look at some indirect observations. Get some proxy metrics and so on and just be interested in to see how it goes.
[00:07:52]And I’m not aware of too many of the people who’ve been on that journey. I’m aware of the great guest mentors we’ve had on strengthen the numbers, who shared some ideas that have worked some that hadn’t worked and what they learned from them, things to avoid. I think that’s very useful information to share.
[00:08:06] So I definitely commit to sharing how it goes. But again, I’m curious to understand from you, have you tried something like this, has it worked for you? What did you learn? And would you be willing to share it with others as well to save the rest of us? Some pains along our journeys on this one, but anyhow,
[00:08:22]what will be, and and yeah, as always hope you enjoyed this week’s episode, if you did, please remember to share it with your friends and colleagues and you can subscribe on all the major platforms, iTunes, Stitcher, SoundCloud, YouTube, and Spotify. And as always, we really appreciate you investing your time with us today.
[00:08:38] So until next time, take care of yourselves and let’s keep on building our strength in the numbers.