November 21, 2013
Linking hospital boss benefits to sale of Mars Bars makes me sickPosted in Behavioural Economics · 131 comments ·
A bonus is supposed to be an incentive for an employee to be more productive. In the case of a hospital chief executive, presumably a bonus should be related to running a better hospital. You’d think that has to be linked to patient care – both in terms of its efficiency and the experience of the patient. It should also factor in other hospital workers, making sure they are not only efficient, but that there is high staff morale.
This is what a hospital does. It exists to look after the health of its patients and, where the staff is looked after, this will be easier to achieve. This is exactly what we patients expect when we present to hospitals and good management seeks to achieve this sweet-spot where respected workers administer excellent service.
It is, therefore, a shock to hear that the bonus of the Chief Executive of Crumlin Children’s Hospital is linked to the sales of Mars Bars, Crunchies and Twixes in the hospital shop.
Your small newsagent shop which is in the business of maximizing the sales of Mar Bars, Crunchies and Twixes might link a bonus of the person on the till, who is the point of contact between the consumer and the newsagent, to the sales of Mars Bars. But linking the bonus of the hospital boss, let’s call him Mr Mars Bar, to the sales of Mars Bars to sick kids and their concerned families, makes me feel sick. It is another example of the moral sleeveenism, which seems to infect so much that goes on at the highest levels of large parts of the public sector.
Don’t worry, this is not an anti-public sector article, but one that points out how shameful it is that grown adults – so called pillars of society – would extract money from the public purse in such a way. Take a bonus by all means (if you deserve it), but please don’t treat us, the people who pay your wages, with such disdain. Don’t dream up a little scam, linking the bonus of the chief executive to the sales of Mars Bars to kids who are ill. It’s too horrible.
If it is a smart stroke to get over government pay guidelines, which is what it looks like, consider for a second the moment these insiders stumbled across the grotesque gombeen idea of linking a bonus for Mr Mars Bar to the sales of sweets to hospital visitors? Can you imagine the self-satisfied nudges and winks as these insiders figured out another way to gouge the public purse and dress it up in the meritocratic language of the modern business-school?
Quite apart from being annoyed at this scam for people paid well over €100,000 by the rest of us, the bonus issue should force us to focus on the crucial question of whether bonuses actually work?
You will remember during the boom, bankers claimed that they had to have bonuses of a certain gargantuan quantum or they couldn’t do their jobs and would have to go to the competition. The other jobs they claimed were lined up ready with open wallets to take them were never specified, but remuneration committees (which they usually also sat on) rarely asked questions.
The central idea is that monetary bonuses enhance performance and that top jobs are so complex that the performance of the head buck cat is essential to the overall performance of the company. Whatever about the fact that it is deeply unfair for the chief executive to earn multiples of the average worker, many business colleges accept the notion that the boss should be paid such multiples. The logic seems to be that where motivation is suspect, money can cure it. So if the service isn’t working, pay the bosses more and they will work as hard as they can to make things better.
This sounds intuitively right, doesn’t it?
Experiments by behavioural economists spear-headed by Professor Dan Ariely recent star-performer at Kilkenomics, reveal that bonuses change behaviour but not in the ways we expect.
The behavioural economist carried out an experiment to see if people actually behave in the way we think they do – work better, smarter, harder when a big bonus is paid.
In the experiment people were asked to carry out all sorts of tasks demanding attention, memory, concentration and creativity. One third of the people were told they’d get a small bonus, one third a decent bonus and one third a huge bonus.
What would you expect? Obviously the people with the bigger bonus would work harder, wouldn’t they? That’s not what the researchers found. Oddly, the ones with the medium bonus performed no better or worse than the ones with the small bonus and, bizarrely, the ones with the biggest bonus performed worse. This might be because they thought they had earned enough and stopped. If you think this is strange, next time you have a chat with a taxi driver who says he is knocking off because he has earned enough that day, remember that people don’t always respond to the allure of more money by working more.
The psychologists repeated the study using another group but this time only gave two bonuses – one big and one small. They also divided the tasks into one demanding reasoning and cognitive skills, while the other was simply mechanical skills involving tapping a keyboard.
In general, they found that when it comes to mechanical skills, the bonus increased performance but for the harder stuff, the bonus had no effect.
Other researchers studying the impact of bonuses on individuals and teams highlighted the negative impact that high bonuses can have on those staff who don’t get a bonus – as you would expect.
One of the reasons bonuses fail is because bonuses tend to motivate people to specialize on areas where they can make money to the detriment of all others.
If you set up bonus structures to motivate people to focus on certain areas, they will focus on them, often to the detriment of other areas, including the morale of those around them. Think about the impact of setting up a bonus for the head of a hospital in order to evade government pay guidelines, and basing it on the sales of Mars Bars rather than patient outcomes.
As a taxpayer, if that doesn’t make you feel like a sucker taken for a ride by people who don’t understand the meaning of the expression “public service”, I don’t know what will.
David Mc Williams will host the Winter Tales Book Festival at Dalkey on December 7th. www.dalkeybookfestival.org