Thursday, April 20, 2006

The Performance Bonus Fallacy



In the business world and even in the public domain it has become regular practice for employees to commit themselves to specified tasks and targets and be rewarded with – additional – bonus payments accordingly.

There is is nothing against this practice offhand. I believe both an organisation and its staff can benefit from certain incentives that drive them beyond the mere fullfilment of their statutory or contractual obligations. And if every employee in the organisation is committed in similar fashion it works as a reciprocal arrangement at all levels, even at the top.

So, fine.

But there is a downside. And this is not so much in the principle as in the way the entire institution of tasks, targets and – particularly – bonusses seem to have evolved over the past decades.

Let’s start at the top.

In our time we know of many instances were the bonussystem has become a fixed, sizeable element of what already are fairly sizeable salaries. And even if there is some allowance for actual results (or performance), the bonus remains huge. I know of very few cases – if any - where these bonusses can reasonably be related to any performance of realistic human dimensions. In most contemporary board rooms, the mere fact the people have reached that hemisphere of life attracts these entitlements and exempts the system from actually measuring true performance against real benefit. I call this an outrage.

Secondly, down the line, employees tend to happily underwrite tasks and targets that cannot possibly be met simply on the strength of their own input and motivation. Meeting our targets in most cases means: the signature of some one else.

How can your performance be assessed on that basis? I call this ridiculous.

But many people, if not the majority, accept this fallacy. People accept the pressure to commit themselves to commitments of others simply because they are eager to get their share of the cake.

Big deal!

In my view this state of affairs feeds dishonesty, embezzlement, playing or fiddling with the figures – untruthfulness. Stupidity.

Think about it. Go for a clean salary. Just be payed for your jobs’ worth. Commit yourself to it. Perform, by all means! But never get yourself entangled in a situation where ultimately only a bribe can keep you free.

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