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March 01, 2011

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Glub

Unless the bonus is a function of the individual's output, and not driven by team or company performance?

Neil

So... performance-linked bonuses are only effective when performance is adequately measured? Shocking! And a better approach is to place a cap on bonuses so that the companies that *do* use them effectively can no longer do so, while those that use them poorly are shielded from their folly and remain active in the marketplace for longer?

PS – A bit rich to take a swipe at libertarians for being glib while in the same sentence oversimplifying to the point of idiocy their position on incentives, isn’t it? I’d have thought even the most vulgar of libertarians would argue that actual incentives are not always the same as intended ones – indeed, isn’t the Law of Unintended Consequences the bedrock of all libertarian scepticism about government action?

BenSix

...indeed, isn’t the Law of Unintended Consequences the bedrock of all libertarian scepticism about government action...

'Tis! On the other hand - and without much desire to reduce the discourse to mere bitchiness - more than a few aren't wholly consistent in applying it.

botogol

I have worked in many investment banks. I can assure you that people focus very hard on their bonus, and work for it.
If there is a problem, or an unintended consequence of bonuses it's that people deliver very precisely the numbers/behaviours that are rewarded in a bonus .. and don't worry about anything else. If' it's not part of the bonus calc it's not important. They also might achieve the numbers/behaviours in ways that the management might not have anticipated.

Richard T

The difficulty I have with bonuses is that, on the whole, they seem to be paid for the individual to do the job they're paid for. This view is strengthened by what appears to be the contractual nature of bank bonuses.

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