It's counter-intuitive but according to Yahoo UK, they're falling one by one. First RBS, now National Rail. This year's bonus season could finally be the moment the tide turns against these incentives, at least where public ownership is a factor. Labour's opposition day debate wants to limit them to just "genuinely exceptional performance". But even that is too much.
Bonuses should be scrapped for all but the simplest mechanical tasks. This is not for moral or political reasons but purely financial ones. They do not work. Bankers and City lobbyists tell you they must reward highly-talented individuals or else they will flee the company. The argument is self-serving, but more importantly, it is demonstrably false.
In 2005, the Federal Reserve Bank of Boston published a study by economists at MIT. Researchers had collected a group of students and offered them cash rewards of around $50-$60 for completing a set of tasks, which ranged from memorising strings of digits to throwing balls at a wall. There were three levels of reward available. The researchers found that for tasks which involved mechanical skill bonuses worked very well and led to higher performance. If you use them for picking strawberries and factory assembly lines, they will pay off.
But where the tasks required even rudimentary cognitive skill, something interesting happened: the bonuses led to poorer performance….
Find out more at http://uk.news.yahoo.com/comment/talking-politics/why-bonuses-don-t-163930208.html
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