Measurement Madness: Recognizing and Avoiding the Pitfalls of Performance Measurement

Chapter 9Failing Rewards and Rewarding Failure

Since the Most Excellent Order of the British Empire was established in 1917, many men and women have been created knights or dames by the British Crown for their services and work in government, the military, business and the arts. Being awarded a knighthood is a prestigious matter and a great honour, although no monetary reward is associated with the award. On the flipside is the more serious fate of being stripped of an honour: not only is this a grave affair, but it is also incredibly rare.

On 31st January 2012, Fred Goodwin, former CEO of the Royal Bank of Scotland (RBS), was stripped of the honour given to him in 2004 for services to banking, thus losing his title of “Sir”. In the past, only those convicted of an actual criminal offence or those struck off professional bodies had suffered such ignominy. Mr Goodwin also joined an auspicious list of those honorary knights who had also been stripped of their title, such as Robert Mugabe, Nicolae Ceauşescu and Benito Mussolini. How could this happen? Was what Mr Fred Goodwin did so bad that he could be compared with such notorious figures?

Apparently, his services to banking had not been particularly valuable. Under his helm, between 2005 and April 2008, RBS raised a record-breaking £12 billion in cash just months after acquiring Dutch bank ABN Amro. Unfortunately, the aforementioned deal had left RBS unable to absorb the “credit crunch” losses, and the British taxpayer had to ...