There is a great debate at the moment relating to bankers’ bonuses. Whether organisations that were bailed-out of imminent failure through the injection of taxholders’ money should be paying bonuses to their staff.
The response the new Chief Executive of RBS, Mr Stephen Hester echoed the views of the banking community in that bonuses were important as “(I) need to make our best people stay and attract better people to replace the people who got us into this mess”. So, in short, the banks’ best people would only do what they do, and do it well, as long as they were highly remunerated… In my mind, the issue here is not one about salary nor incentive payment. It is about the fact that individually-focused bonus, based on a person’s individual merit, exacerbates the behaviour that got these institutions into trouble in the first place: single-minded focus on personal gain without consideration of longer-term impact nor impact on the future of the business, nor to even society at large.
One may argue that it is not in the place of a banker to think about social implications of their investments, let alone their actions. However, if there is one piece of learning from this deep recession we are in, is that we are not alone. A whole chain of institutions have been knocked down like dominos as part of an enormous gamble.
I would thus argue, that, if these government bail-outs are going to be a success, organisational cultures of these banking institutions need to be completely rehashed. It is no longer about the individual merit, but of peer success and remuneration needs to reflect that. Moreover, the metrics associated with performance should be reviewed:
• To create a collaborative spirit, then bonuses or other incentives should be tied to the success of specifically collaborative endeavours, between business units, departments etc
• To set a long-term view of success, then why not consider rewards based on a 2-year or more basis?
• To create a spirit of innovation and a focus on continued business enhancement based on new ideas, then employees need to have both the freedom and motivation to make the changes or propose the ideas they see fit. Incentives and benefits should be attached these successful endeavours.
The most important part of all this, however, are not short-term fixes. The suggestions above are but a snap-shot of the myriads of alternatives possible to increase engagement.
The critical piece to this puzzle is Leadership – each of the CEOs, the Executive Board, and senior management need to create, espouse and communicate, the new Vision of sustainable, community-based, ethical business to their employees and achieve engagement based on their contribution to the business and society as a whole. The rest will follow.
I am afraid, however, this fixation on the requirement of bonuses in order to keep staff motivated and engaged is an indication that this radical vision of change that is desperately needed, and that taxpayers are expecting, is a long way off.
