independent

Sunday 20 April 2014

Bonus culture has made us forget that work is not just about making money

I have long been a fan of 'Dilbert', the cartoon strip about a dysfunctional office, to be found in the nether regions of this newspaper. The strip, by Scott Adams, is syndicated from the US. But one last week might have been hand-picked with exquisite care, given its timing and topicality for Irish readers.

The bonus/efficiency furore was at its height. Revelations poured forth at committees from the Central Remedial Clinic (CRC), St Vincent's Hospital and Irish Water. With pretty exquisite timing, in the middle of all this, the new strategic plan from Brendan Howlin's Department of Public Expenditure and Reform was launched, with a focus on efficiency, openness, transparency, accountability, leadership and capability.

Dilbert was on the case. The strip in question had the manager say to the office cat, which is one of the characters: "We need employees that are motivated by our vision, not by money."

"Are we looking for any other mental problems, or just that one?" replies the cat.

There you have it, really. The notion that anyone would take anything besides their remuneration into account in deciding where, and how, to work is regarded as a joke. Perhaps it was always naïve, but it wasn't always a joke.

Money and motivation have long been a source of study and confusion. As students, we spent quite a lot of time on piece rates – payment per item produced. These were generally held to be a good thing; although not convincingly, even to a student.

Not long after, the Japanese began to wipe the floor with western industry and it turned out they did not reward workers that way at all.

A sense of belonging to the company was more important than pay. No doubt Japan's social mores helped create this system, but the Japanese turned out to be brilliant managers in other countries as well (even north-east England, for goodness sake) while a lot of western firms took on Japanese ideas.

The bonus "culture" is more recent still. It has made top people's pay a political issue to a degree never seen before; although top pay has rocketed in the past 20 years.

It started with the banks. Worse – it started in the investment banks which drove the long boom from the 1980s along with the great crash which followed.

UNSUITED

That is hardly an advertisement for the wisdom of this method of payment. Most discussion about bonuses focuses on their, sometimes gargantuan, size. But the incentives they create are more important.

Bank bonuses were paid as a share of profits, which inevitably encouraged risky trading in the investment banks. When they became a feature of retail banks, they encouraged risky lending. An obvious conclusion would be that bonuses are unsuited to banking.

It is not at all clear that they are suited to anything. But placing limits on salaries – as espoused by many politicians and commentators – makes matters worse.

If bonuses are a bad way to attract talent and reward sound management, competitive salaries must be the alternative.

These difficulties arise in competing, trading businesses, where sales and profits can be measured. The problem is assessing the real quality of sales and profits. That being so, one has to question the use of bonuses in the public service, where such assessment is all but impossible.

Mr Howlin's document sets out ambitious objectives for the public service up until 2016, although the use of clear language does not seem to be one of them.

One exception, in terms of clear language, was the passage: "Notwithstanding progress to date, the Civil and Public Service in Ireland is lagging in terms of best practice in the critical areas of leadership development and talent management."

Mr Howlin was firm that there would no resumption of bonus payments until we get to the end of Haddington Road. But it seems pretty obvious that they are on the cards after that. "The contractual framework for senior civil servants will need to be examined," the document states.

The siren song of the bonus culture can be heard in the background. It will be said again that these payments will attract the best and brightest, to give of their all.

Except, of course, nothing like this seems to have happened in either the private or public spheres. Exceptional performance will always be confined to a small percentage of managers. Most bonuses are paid for simply being a senior executive. Those who cannot achieve even that, leave with huge severance payments and pensions, waving goodbye with copies of their contracts.

Everyone needs to be clear about where recent history has left the Irish public service. It is going to be one of the smallest in Europe, and one of the best paid. It is small precisely because its members enjoy a significant earnings premium compared with most EU countries.

That means it has got to be one of the best in Europe to be able to deliver even average services. There is no room for lagging by anyone.

Some may see this as an argument for paying bonuses to encourage this superior performance. Quite apart from the difficulty of applying bonuses in a manner to achieve this, it is blatantly clear now that they have a corrosive effect within organisations, as well as damaging their standing with the citizens they serve.

STATUS

This is Dilbert's question, and it can no longer be laughed off. Government workers are guaranteed financial security to the grave – and beyond in the case of dependents. Senior government staff are guaranteed a life of comfort. Is it a sign of mental instability to regard that as reason enough to give of your best?

The answer may also go back to the banks and their ilk. The elevation of financial rewards in popular culture has reduced the relative status of public servants. There are no nurse or police outfits for girls and boys in the toy shop now; just superhero costumes. The service has not helped itself, by maintaining 19th Century methods of organisation and promotion.

Mr Howlin's document addresses this. Fixing it will be harder than handing out five-figure bonuses. Decent equipment and accommodation for government workers would be a start, followed by mobility and flexibility in how they go about their work and professional standards of management among their superiors. Bonuses belong in the kind of place Dilbert works in.

Irish Independent

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