CHAPTER 1 Part V

7) Administration of Rewards and Punishment (赏罚孰明？)

Here I would like to stress the importance of rewards and punishment. Han Fei Zi, a great politician during the Warring States Era stressed the importance of administering rewards and punishment, writing two chapters on it. He said that the administration of it is so important it actually determines the survival or demise of the nation. And equate the administration power of rewards and punishment of the ruler to the fangs and claws to a tiger. Without the power, the ruler would not be able to administer the affairs of the state well. Would anyone listen to their supervisor if it lacks the power to administer rewards and punishment? Of course not, because he has lost authority on you.

One of the two chapters written by Han Fei Zi, is about setting the rules and condition for rewards and punishment and the next chapter on how to administer it. The reason why a chapter was written on the administration is because during those days and even till now, we tend to reward more to people that we know and love and excuse our relatives or friends from punishment when they make a mistake. Why is this so? This is because firstly, we are human beings thus we have feelings and secondly is because these friends affect our social life. We do not want to offend them.

So it is important in the modern business that they structure their reward and punishment correctly so that their work is aligned with that of the business strategy and culture. For example if you reward base on individual sales, it is very likely you would not be promoting teamwork. If you reward base on individual product department performance, it is very unlikely that cross selling would not occur.

Besides aligning with the business strategy and culture, the administration of rewards and punishment plays a big part in talent management strategies as well. In business, the pay you give to your staff is always compared to one that is similar job scope and preferably in the same industry to make a good comparison. Beside the pay being compared with other similar jobs, it is also compared with inflation as well. Employee may feel shortchanged, especially in times of high inflation, when income increase cannot be in tune with inflation.

There are other factors that determine whether the administration is successful or not. But I shall leave it to other appropriate times.

Cheers!