The above is a quote from Deutsche Bank’s new co-chief executive John Cryan which led to several articles in business papers this week; most notably in Financial Times. Hopefully, this will contribute to an increased understanding and belief that individual bonuses lead to poorer organizational performance.
The editor’s letter in yesterday’s FT – see below – includes a great example: It notes that the period during which banking wages were at the very highest, not least due to lucrative individual bonuses, neatly corresponds to the years when shareholder returns were at the worst.
Did you ever wonder why companies on average make significant changes to their individual bonus schemes every second year? It is not a ‘continuous improvement’ effort… it is because they fundamentally do not work as intended.
We wonder how long it will take for shareholders to wake up and stop this value-destructing practice of individual bonuses.
Reference is also made to our most recent newsletter about: The Bonus Paradox – or: Why don’t we fire HR?