Thursday, 6 October 2016

Hot topic: Paying bonuses




There's an interesting piece in HR Magazine today questioning whether bonuses are an effective reward mechanism.

The article includes comments from Craig Newman, chief executive of Woodford Investment Management which gave up paying bonuses last year. Their conclusion was that bonuses are largely ineffective in influencing behaviours.

There are several more recent examples which relate to this too.

The Wells Fargo scandal is probably the biggest of these. And also the most stupid. If you pay people bonuses to sell bank accounts without motivating other behaviours or creating an ethical culture guess what's going to happen? People will sell more accounts. Even if their customers don't know about them.

Or actually equally powerfully there is the example of ride operators at Alton Towers being paid bonuses to minimise downtime. With understandable if terrible results.


Bonuses can work, but only if you set measures carefully and you understand how people are going or are not going to be motivated around these.

I like Peter Cheese's comments that "we need to go back to the fundamentals, starting with how we evaluate performance beyond just delivery of numbers, how we assess performance, making it clear and simple, how we recognise and encourage good performance beyond just paying more, and how we create fairer payment systems."


I'll be speaking about some of the opportunities to do this at a session with beqom and Microsoft in London on 15th November.  Come along if you can - I'll share more details with you shortly.

The beqom Total Compensation platform is used globally across all industry sectors by over 100 large companies such as Microsoft and Vodafone. It addresses all Performance and Compensation aspects such as Salary Review, Bonus, Long-Term Incentives, Commissions, Benefits, Non-cash rewards and all key drivers towards Employee Performance and Sales Performance.

HR, Sales and Finance organizations leverage the platform to drive performance, retention, cost optimization and... happiness among their people.


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