Bank Pay Plans: Performance Incentives Can Lead to Worse Performance
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Could it be that banker bonuses and other pay for performance incentives are not just ineffectual, but could actually breed bad performance?
In this fascinating video of Dan Pink’s talk on the Surprising Science of Motivation from a TED event in Oxford, you can find out why the answer is yes.[br]
Could it be that banker bonuses and other pay for performance incentives are not just ineffectual, but could actually breed bad performance?
In this fascinating video of Dan Pink’s talk on the Surprising Science of Motivation from a TED event in Oxford, you can find out why the answer is yes.[br]
Could it be that banker bonuses and other pay for performance incentives are not just ineffectual, but could actually breed bad performance?
In this fascinating video of Dan Pink’s talk on the Surprising Science of Motivation from a TED event in Oxford, you can find out why the answer is yes.[br]
Dan, Al Gore’s former speech writer, will explain using live examples taken from years of social science research why incentives work only for jobs that are mechanical and require ‘focusing in’. Incentives for work that requires thought, creativity or working with fuzzy situations, in other words the work that senior bankers should spend most of their time doing, will actually lead to worse performance. You will particularly enjoy a choice irony – that one of the most extensive studies to prove this point was funded by the Federal Reserve.
There is a very close parallel here with financial engineering and complex risk management models, which SHOULD allow us to better deal with uncertainty, but INSTEAD give us the illusion of certainty, using a ‘focusing in’/ mechanistic approach, and help banker to peddle product, while making all of us face more systemic risk.
[br]Dan argues, not surprisingly, that the models of business compensation are out-moded. He says the future organisation will pay a good salary so that money can effectively be ignored, and then will focus on the three sources of true motivation:- Autonomy
- Mastery
- Purpose
I can’t explain this half as well as Dan does, so I would thoroughly recommend you finding 18 minutes to watch the talk.
