Bonus Cultures and Ideal Banks, Schools, Hospitals

In light of the ongo­ing debate with regards to the fin­an­cial sec­tor’s so-called ‘bonus cul­ture’, eco­nom­ist John Kay looks briefly at the his­tory of the bonus and why the idea of a ‘bonus cul­ture’ is a “poor joke” (using the example of teach­er and doc­tor bonuses).

At one time, the offer and receipt of a gra­tu­ity was a state­ment of social and eco­nom­ic superi­or­ity on the part of the giver, its accept­ance a state­ment of social and eco­nom­ic inferi­or­ity on the part of the recip­i­ent. To be salar­ied – to be trus­ted to do the job for which you had been con­trac­ted and paid – was a mark of status. Con­trac­tu­ally agreed per­form­ance-related pay – com­mis­sions and piece work – was wide­spread in shops and factor­ies, but has now largely been aban­doned.

The com­mon out­come was that employ­ees came to care more about the quant­ity of the product than its qual­ity. The sys­tem polar­ised the con­flict between the interests of the organ­isa­tion and of those who worked in it. […]

Teach­ers and doc­tors strongly res­ist the intro­duc­tion of a bonus cul­ture: not just because they resent meas­ure­ment of per­form­ance and account­ab­il­ity for their activ­it­ies […] but because they oppose import­ing the cul­ture of assembly lines. They fear an envir­on­ment in which they would be encour­aged to focus on nar­rowly quan­ti­fi­able object­ives at the expense of the under­ly­ing needs of cli­ents.

Even if many teach­ers and doc­tors are incom­pet­ent and lazy, many oth­ers are ser­i­ously com­mit­ted to the organ­isa­tions for which they work, the sub­jects and spe­cial­isa­tions to which they are devoted, and to a broad­er sense of pro­fes­sion­al eth­ics: and it is only people like these who estab­lish the kinds of schools and hos­pit­als we want as par­ents or patients.