THE TYRANNY OF THE SELF-DEFEATING BONUS

A lot has been written about this subject and most of it quite angry and in the style of “the unacceptable face of banking”. Bob Diamond new CEO of Barclays as ever to the fore.

But the accumulation of wealth seems normal enough and actually quite healthy. Indeed over time the spending of individual wealth on great art, music, buildings or sport (because that’s where money tends to end up) has been a good rather than a bad thing.

What needs more study is whether bonuses actually work.

Anton Surorov, a Russian economist, shows the problem with human relationships based on reward systems is there’s no going back. Once you say 'do this and you get x', the agent to whom this is said will only do whatever it is if given x or, more likely, start negotiating to do it only if given 2x in the future. Mr. Crow are you reading this?

So far, so bad.

Neuroscientist Brian Knutson takes us a stage further forward. MRI studies of the brain show that when people anticipate getting a reward the activation in the part of their brain called nucleus accumbens is identical to that a drug or alcohol addict will display.

So once on that bonus treadmill you are hooked.

Worse than that, such activation predicts behaviour one would seek to avoid in employees: “both risky choices and risk-seeking mistakes”.

Intuitively many of us know the reward structures we have in place today are not aligned to performance…would Wayne Rooney play better football if paid more? Would Tiger Woods play worse if paid less? (Well we actually know the answer to that in the Ryder cups of the past which may tell us something interesting about his highly addictive nature.)

The big question is about what really motivates people, what really transforms their performance. Look no further than Daniel Pink’s book “Drive” on this subject which I really recommend.