Naked CIO: Bonuses reward wrong behaviour

Do bonuses reward the right behaviour? The Naked CIO airs his feelings on the matter.

Sitting around the boardroom I have found that more and more board members think in short-term time frames based on the budget year.

I also see some ridiculous compensation plans that expose the barrier between have and have-nots - those that qualify for bonuses and those that do not.

I believe incentive plans detract in some ways from managing and leading the business based on the best interests of the company. They certainly provide significant motivation for individuals to perform - but at what cost?

All too often the might of money causes individuals to act in their own self interest for short term gain while ignoring long term benefits.

At a time when we are all feeling the strain of financial constraints, this bonus factor becomes even more prevalent. To meet profit targets on lagging revenues means cutting costs across all areas - but what these cost cuts really achieve is a higher profit ratio which in turn leads to big bonuses for those that brought it about.

If the logic is followed all the way through this generally means laying off people or cutting project funds in order to sustain one's individual income. I realise all senior leaders have fiduciary responsibility and this could be a grey area, however at the same time I witness on a daily basis moves called 'strategic' which stink of selfish opportunism.

I'm sick of it.

I am sick of leaders making decisions based on no sense of real business benefit but on short term reward for this year's budget. Maybe one of the reasons I am sick of it is that IT is a key and significant target for this profit line grab.

Yet in reality more investment in IT and more long term strategic vision to the principles of applying IT and organisational processes would improve many if not all organisations.

I have been bold enough to argue that given 24 months and a significant amount of capital I could rid our organization of 20 per cent of its administrative and operational costs. I believe this can be achieved.

It should seem that a payback ROI of one year and a long term reduction in cost would be attractive to any executive, yet this type of initiative is rarely considered in any material way. The fact is this would offer no possibility this year to line the pockets of those that I am pitching it to so therefore it has no real value in their eyes.

Instead they all agree cuts are necessary but at the same time acknowledge these cuts will hurt the ability of the organisation to operate effectively and will have ramifications in the years ahead.

Leaders in today's boardroom lack the fortitude to make decisions that may impact their compensation but benefit their company - and yet isn't the former why they are employed in the first place?

Unless compensation plans have universal application and a strong tie to a strategic mandate, they are impeding the success of companies throughout the UK and the world.