A minefield – but here goes!

Everything I have heard and read about the controversy over bonus payments fails to mention an important principle: contingency. It is only when a bonus is applied contingently that it works as a motivator. In essence this means that a bonus, if it is to be effective, must a) be conditional upon the occurrence of successful behaviour and b) must follow the behaviour in question quickly enough for the link to be obvious. A bonus that was non-contingent would not act as an incentive, it would just be a thank you present: nice, but without any motivational impact.

Lots of things at work are non-contingent – for example, a monthly salary that stays the same regardless of how hard the person has worked in a given month. Some months might be quiet, but the salary stays the same. The performance during the month makes no difference to the monthly pay cheque. It is non-contingent but welcome.

I’m the first to admit that the promise of a monetary reward (in my case a fee) gets me to show up. But, once I’ve done that, it has little impact on my performance. Other factors take over, such as not wanting to make a fool of myself, being eager to please my clients, the extent to which the participants show an interest in what I have to say, the questions they ask and so on. The prospect of receiving a fee has nothing to do with it. Even when I donate the fee to a charity, I work just as hard.

Bonuses were dreamt up in order to overcome the shortcomings of paying people a fixed, non-contingent salary. The basic idea was to have a system that was contingent upon success. In other words, the success, defined in advance, had to occur before any bonus was paid. And the bonus would have to be timely, paid as soon after the success as possible.

There are, of course, two interconnected perils. The first is how success is to be defined; the criteria, or targets, often distort people’s behaviour so that local successes are achieved at the expense of wider organisational aims. The second peril is to do with timing. Bonuses, in their eagerness to motivate, tend to reward short-term behaviour.

One thing is for sure, we can’t uninvent bonuses. All we can do is think harder about the implications of making them contingent.