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.