In this interesting article from the BBC, a fund manager, Neil Woodford, explains why he has stopped paying bonuses to his staff.
Instead, his team will get an increase in pay and benefits.
I think this is interesting – not because Mr Woodford is doing something new, but because he is being honest. He says that bonuses have become a given; something his employees feel they are entitled to. And in financial services, he is probably right. Therefore, they should not be called bonuses, because they are not incentivising improved activity.
There is another argument that in financial services, where the media spotlight on pay structures has been relentless, there’s another story about bonuses being a remuneration architecture for sneaking cash into pockets without high basics. This again suggests that the very meaning of a bonus is contorted in this instance.
Financial services is a business which is hugely influenced by money. We’re all different, but bankers and salesmen are generally more target-driven than artists and charity workers. If cold hard cash isn’t incentivising bankers to work harder, then have we got remuneration all wrong?
First off, few of us are motivated by money half as much as we think we are. Even aside of Maslow’s hierarchy of needs, in which money is by no means top dog, as we have become progressively more well off, the majority of us have reached a lifestyle where the marginal increased satisfaction of gaining money decreases rapidly.
But more importantly – and this is the part that few commentators bother to mention – business success is no longer predicated on individual contribution or incentivisation. As businesses have flattened out their management structures and got rid of any fat on the bone of their operations, teams have to work together to get anything done. Businesses are no longer chess games between duelling departmental heads, with teams of pawns beneath them. (If that’s how your company works, get out fast…)
Smart businesses are agile and collaborative. If there is a bonus structure, the basic unit of entitlement should be the team.
We have seen this to be true in every programme improvement activity we’ve ever done: money is a poor incentive compared to the pleasure of working effectively with committed people who take pride in both their own and their colleagues’ contributions.
After all, who’s happier? The people who say “I get up for work each day because I love it”, or the people who say “I do it for the money”?