Should government-subsidised companies pay bonuses?

The management expert: No

Gary Miles,
Director of open programmes, events and associate relations,
Roffey Park

Bonuses are a tried and tested way of rewarding staff for successful performance and, provided those staff achieved what was required (though one could argue it should be over and above what was asked) then, without question, bonuses should be paid. They are a great reward mechanism. However, during the past year, organisations and their employees have navigated their way through a turbulent economic crisis, the likes of which they have never been seen before. They’ve faced redundancies, cost-cutting exercises and the constant juggling of the purse strings to make ends meet – with the finger of blame firmly pointing towards the financial district. The world of work has changed, and perhaps it is time for organisations to reward and recognise staff in a different way.

So the choice for leaders at those government-subsidised companies is simple. Do they want to regain credibility and respect? Or do they want staff who are motivated by money and likely to jump ship for a better offer? Not paying those bonuses will go some way to demonstrating ethical leadership that will pay dividends in the longer term – and staff worth hanging onto will understand and stay.

The business psychologist: Yes

Stuart Duff,
Head of development,
Pearn Kandola Business Psychologists

The public reaction to the massive bonuses received by a small number of bankers during the recession has, not surprisingly, been very negative. But our anger isn’t really about the bonus system. It’s about our shock at the greed, dishonesty and lack of integrity of the leaders of those businesses. When bonus payments are over-inflated and encourage the kind of outrageous risk-taking behaviour that creates the problems we are now experiencing, then that is a problem of poor leadership and decision making.

From a psychological perspective, there are a number of critical factors that enable bonuses to be genuinely motivational and effective in encouraging improved performance. For instance, a bonus needs to be clearly linked to individual contribution, it must be equitable and fair when compared across the organisation and the industry, and it should be paid at the right time for the right behaviours. Neglecting any one of these conditions will significantly reduce the effectiveness of a bonus.

This is the key issue. Offering bonuses is still one of the most direct and effective ways of motivating and keeping good staff. Failing businesses, regardless of whether they’re subsidised by the government or not, need these employees to be motivated, so we must allow them to reward strong performance. Just as long as it’s for the right kind of performance.

The recruiter: Undecided

Alison Burgin,
Executive director,
Badenoch & Clark

Any reward strategy uses benchmarks from the rest of the industry as a starting point. It’s the only way companies can ensure they’re competitive when it comes to attracting and retaining the best talent possible. The worst thing any failing or government-subsidised company can do is lose sight of that – if they do, they’ll compound their problems by losing their best people.

Bonuses, particularly for bankers, have put this concept under a great deal of strain. Government-backed banks need the highest calibre professionals around. Logically, that means paying bonuses, but the practice is clearly out of step with the public shareholders.

A third option may be to look at forms of compensation other than big bonuses. Our own research shows that banking and finance professionals value clear career paths, training opportunities, job security and flexible working practices incredibly highly. These benefits are much more palatable to the wider public.

The equation isn’t as black and white as some are painting. It’s not a case of choosing between paying big bonuses or losing all your talent. Yes, there is some for whom a big bonus means everything, but there are many other talented professionals who equally value other forms of benefits.

The employment lawyer: Yes

Elaine Aarons,

The retention of talent is not a political issue – it is commercially crucial. Bankers have always worked for money and they always will gravitate to where they can earn most. However, bonuses need to be paid in a more intelligent way.

The process for deciding how much is paid needs to become more transparent and tailored to encourage long-term performance. The way bonuses are awarded needs to be based on measurable objective criteria. Too often the City bonus culture is too opaque.

And banks need to be more creative about introducing safeguards that provide for a potential off-set against deferred bonuses in the years when losses arise. What the public hates is that, from the bankers’ perspective, there’s no pain, only gain.

Another issue is that where sign-on bonuses are offered to attract new talent, the process should be carefully considered to ensure that long-term staff are not being penalised for their loyalty to the company.

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