Apparently on Radio 4 this week, Shane O’Riordain (Group Communications Director of the Lloyds banking group) said “It’s entirely right for companies both our company and others, to pay bonuses when performance targets have been met – its an appropriate part of compensation”One wonders, knowing the sort of unethical things that were being done in the name of ‘performance’ and bonus attainment, that the phrase “entirely right” shows that these top bankers still just don’t get it. After all it does appear that a lot of the time their ‘performance’ could be equated with highly driven ‘unethical behaviours’ (see Unintended Consequences – what do very large bonuses attract?)Later the same morning Radio 4 had Paul Moore, the HBOS “Whistle-Blower”, being interviewed by Michael Buerk in the programme “The Choice”. This contained extraordinary material on the targets culture. It included the “Cash or Cabbages Day” when, in full public gaze, those who had made their targets received some cash, while those who hadn’t were awarded a cabbage. Mr Moore spoke graphically about the culture of fear and much more, which will be familiar to many who found themselves caught up in such a ‘macho’ culture. The Programme can be viewed again on BBC iplayer hereSo I would just like to praise those at HBOS who won the cabbage. Be Proud. Because most likely the reason you did not earn the ‘performance’ cash was that you were behaving and selling ethically!Thanks to Brian Leeming and Henry Neave for bringing the Radio 4 interviews to my attention.
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IMHO this city bonuses issue is a complete failure of Strategic Human Resource Management (SHRM) or more precisely a lack of using it. If HR departments were taken seriously in the city (as much by themselves as banks’ directors) then bonuses would have been linked to the long term benefit of the banks, whose strategic focus is (or should be) on their customers. Whoever is responsible for remuneration has a lot to answer for. The challenge they face is that the city is so focussed on quarterly results an HR Director is pushing uphill to instigate a remuneration package that looks even to a year ahead never mind even longer term.I am very wary of people who demonise those that receive bonuses. If the system changed, yes some people would leave but most would stay as people on the whole are not motivated by money alone and these people will say nothing whilst they receive bonuses. It doesn’t make them demons, just human.Many commentators ask why some executives don’t return their bonuses. In any organisation, who would return a monstrous bonus? Most people, if given the opportunity, would plan on what to do with an impending bonus – e.g. pay off their mortgage in one go – and would be very reluctant to reverse that. City boys and girls like to splash out on three things: Something frivolous, property, and a long term financial investment (e.g. a fancy car, apartment and set aside money for school fees etc) and then the latter two are ring-fenced. Not much room for reversing any of that or raising your hand and asking to give it back.It is also intriguing how many HR people comment, not here I note, on linking pay and motivation… hello, have any of them been paying attention to those HR classes in which they discussed (and read) about what motivates people at work?To summarise, I do not believe bonuses are wrong or a problem. How they are implemented, however, is critical and nowhere is this more important in knowing clearly what is the organisation’s strategic direction: It’s own share price or customer value? Choose the wrong one, as I believe has happened in the city, and you drive yourself into a mess.
MarkHi Mark,Thanks for your comments.If you read an earlier post of mine (http://barrymapp.com/2009/10/unintended-consequences-what-do-very-large-bonuses-attract/) you will see that my viewpoint is that bonuses are the problem particularly when bonuses are performance related. Someone or something has to measure or assess the performance and unfortunately the numbers we learn at School (Math 1.0 – http://barrymapp.com/2009/10/are-we-really-numerate-how-numbers-lead-us-up-the-garden-path/) ignore natural variation in measurements and ignore context. Bonuses connecting to performance will always fall foul of the fact that numbers are fuzzy and not fit for the purpose for which we apply them. Saying that having better bonus payments is what is needed when these systems problems occur, is similar to saying that having better targets (when the existing ones don’t work in the way that was planned) will improve things rather than facing up to the reality that targets are part of the problem. What I am saying is that bonuses are part of the problem. What I am not sure about are ways that a successful business can make sure that employees benefit from that success, that will not distort that success in the long term and we need to come up with innovative ideas. Incidentally the idea of dangling a carrot as a reward to work ‘better’ is rooted in old psychology (http://barrymapp.com/2009/07/creation-companies-apply-the-principles-of-new-psychology-to-business/) and it would be good if all HR training involved some understanding of this. We have come to assume without question that rewards are needed to get people to work well and do their best. Alfie Kohn and others have shown that rewards can sabotage intrinsic motivation, the very motivation that drives us to do an effective job because of the intrinsic joy of doing it. Now a big problem, surveys show, is that a lot of people don’t enjoy their work – and this is an issue about how the work is organised and managed. My premise is that if we create “Creation Companies” rather than “Compliant Companies” () that the joy and the creativity can be put back into the work.