Do Bonuses Work?

The sort of question that gets posed all the time on a couple of the blogs on our blogroll (e.g. Chris Dillow's and Tom Powdrill's).  And a very fair poser for C@W.

Anyhow, an organisation that somehow once got hold of my email address is Emolument ("crowd-sourced intelligence" - meaning endless surveys) which publishes heaps of stuff on salaries etc as well as firing off emails to all and sundry.  This week's offering is: Does employee performance affect pay? and their survey-based answer is:

"most think their pay is not a reflection of the quality of their work. We also note that bonuses have a limited impact perception of pay. Not a single industry shows a majority who think their performance has a direct impact on their paycheck. Only 8% of those who work in the sports, culture & recreation industry believe the quality of their work will affect their salary ... What about finance? Finance firms often argue that their controversially high bonuses are the key to excellence. With only 30% of financial services employees thinking their pay is linked to their performance, it is an argument which does not convince ... If employees do not believe performance drives pay, what do they think does? Is it longevity, politics, being in the right place at the right time? Whatever it is, the belief that performance has little or no impact on remuneration is disheartening and cannot possibly encourage productivity or a thriving corporate culture."

So - there's the challenge. 

Writing as a capitalist, I have never been in doubt that the sales-force needs to be on a (carefully structured) commission, at the very least.  If you've ever been in an environment where there is reasonable visibility of the sales pipeline and a strong connection between sales in this time-period and the immediate fortunes of the company - in terms of jobs, prospects, opportunties and, if relevant, global bonus pay-outs - you'll find even junior staff caught up in hoping the sales-force brings home the bacon, and not resenting the fact they are on commission.

I've also seen some truly dysfunctional bonus schemes.  But I've worked on some pretty good ones, which certainly needed careful design (and endless tweaking to eliminate unforseen consequences) but were, IMHO, evidence that reward can be made to work in the interests of the firm.

What do we reckon?  Are you fired into productive action by the prospects of bonus, or do you launch into office politics in order to position yourself for the dosh?  Or simply assume it's all in the lap of the Gods?

ND

Capitalist Archbishop @ Work?

Churchmen frequently see fit to weigh into the affairs of Mammon - and why not, they have their sermons to write and they know what people are interested in.  There are, after all, biblical precedents - and, let's face it, quite a lot to pontificate upon.

Watching the Beeb's rather good latest episode of 'Bankers', I was struck by the balanced contribution of our new Archbishop, Justin Welby, and minded to post about it here.  Turning to i-player for the appropriate link, what do I find but himself as the frontispiece !

Not merely a talking head, it seems, but the talking head.  How gratifying for the CofE.

Welby is an interesting cove, having worked for many years in the oil industry before the voice of God called him to the ministry.  And now a financial commentator too.

He is welcome to write a guest post here any time he likes.

ND

Labour reduced to one policy for Coneference: Envy

Really, the theme of the Labour Conference this week seems to be how very important it is to bash the bankers. I agree, the Bank of England, treasury offical and ex-Banker Shriti Vadera and the FSA (mainly ex-bankers) have a lot to answer for in terms of creating the economic mess in which we find ourselves.

Oddly, it is not to these well paid mandarins with their final salary pensions that the aim of Gordon Brown is falling. No it is on the private (and public bank) sector. Rows about how much to pay people who are doing jobs are beyond the comprehension of the average Labour back-bencher.

It is not that pay and rations do not need restraining and that some tweaks to stop people gambling others money for their own gain is not sensible. it is just that the concentration on it is such a huge sideshow to the real events now needing policy. The banks are last year's story and the market has taken care of the excessive pay in short-order for the underperfomers who now line the unemployment statistics.

Instead of discussions about how to really reduce the dependence on public services in Britian, on how to fix the many social ills created in recent years, of how to reform the tax and benefits systems; we just have bash the bankers.

What next Estate agents and journalists?

It is both populist and poor, the sign of a weak and clueless government. At least in Germany they have had their successful election over the weekend and have been able to wave goodbye to the poor performing socialists. Roll on May 2010.