It turns out that a big chunk of workers in financial services think that bonuses paid to higher earners are undeserved. They cause resentment, suggests research. Are workers right to feel aggrieved, or is it sour grapes?
According to the Chartered Institute of Management Accountants, or the CIMA, if you want its snappier title, 35% of UK finance professionals feel bonuses for top earners – including salespeople, fund managers and board members – are undeserved . Only in the United Arab Emirates do a higher proportion of workers feel this way. The CIMA also found that 62% of UK professionals felt unjustified bonuses caused resentment amongst their colleagues, rising to 97% amongst workers in the North East.
There is also a view rattling around that bonuses reward short-term performance.
CIM said: “Professionals’ top concern about bonuses is that rewarding the performance in only one area of peoples’ responsibility, encourages an over-focus on that while devoting less attention to other activities. This might narrow down the idea of what success should look like, rather than encouraging the joined-up thinking on which sustainable results depend. Of those respondents who work in companies that operate a bonus scheme, nearly half felt bonuses rewarded short-term performance at the expense of long-term goals. Internationally, the UK came fifth in a ranking of firm’s awarding bonuses according to short-term results, a table topped by China and New Zealand."
Wim A Van der Stede, CIMA Professor of Accounting & Financial Management, said: “These findings reaffirm some well-known issues of incentives related to a narrow focus on what is rewarded and other myopic behaviors. But they also suggest that perceptions of ‘unjustified’ bonuses, whether stemming from ineffective incentive designs or not, can trigger resentment and undermine employee engagement and motivation. This hurts performance, exacerbates myopia and corrodes culture. Designing effective incentive systems is hard, yet incentives that may be fair may not look fair – a challenge that touches on the issue of transparency as well as the question of both how and how much to incentivise.”
Tony Manwaring, Executive Vice-President – External Affairs at CIMA, commented: “Bonuses are a trust issue as much as a financial issue. If customers and stakeholders perceive a company to be paying exorbitant sums to its employees, it will effect that company’s reputation and erode the trust in which they are held. This is something we saw time and again following the financial crisis.”