Guest comment: Quarantining the bonus fever

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Andrew Pullman on lowering the temperature of the bonus round. Founder of People Risk Solutions, Pullman was head of capital markets HR at Dresdner Kleinwort.

The Festive period in the City is an emotional time. It has absolutely nothing to do with peace and goodwill to all men and everything to do with "How much money will I get paid?"

Bonus time is a huge annual challenge to every CEO and senior management team. Pay too little and they could easily watch their business fall apart over the following two quarters as people leave. Pay too much, and shareholders will ask difficult questions about the expanding cost base and their jobs will be on the line.

Weighing it up

Things that need to be taken into account include affordability (the bottom line), commercial factors (which businesses performed best?), cross-subsidisation (which businesses didn't perform this year but might well perform next year?), market pay (how much will rivals offer to poach our staff?), risk (how little can we get away with paying before an individual will leave?) and discrimination (are we subconsciously paying more money to tall white males?).

Coded messages

At the margin, those decisions about risk are all important. The right bonus is one that will make someone happy, but not too happy - just above the level at which they'd reach for a directory of recruitment firms.

Banks have a role to play in determining just what this level is. On one hand, the press talks up pay with tales of exorbitant bonuses. On the other, managers need to bring people back down to earth. It is very difficult to positively surprise staff when handing out bonus letters.

Most managers tend, therefore, to try out a range of gently coded messages they'll mutter to staff as bonuses approach. These include:

"You will be lucky to get anything this year!" which really means "If I lower your expectations enough, anything will be better than nothing."

"The bank has had a tough year, and not everyone will be happy with their bonus," which really means "Brace yourself for a lower number than last year, and don't go and spend anything yet."

"We have tried to be fair with the overall bonus pool, and there are areas that need to be paid even though they have not necessarily fully performed yet," which really means "The bonus pool has been spread very thinly, and your business is helping to pay for someone else."

"There could be some pleasant surprises this year," which really means "I don't want you to even think about leaving yet, and hope that that bonus will be reasonably OK."

Lowering the temperature

What's the solution to the hot bonus flushes? For the individual it helps to decipher the messages as they're imparted, making the eventual number less of a surprise (or shock). And for the organisation, it's vital to create an environment where the bonus isn't the most important reason why people work for you. The delirium and nausea of a full scale bonus fever is not an inevitability. Unfortunately, a little localised sweating is.

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