People Management: When bonus schemes fail to perform

Indira Das-Gupta

Performance-related pay is not always suited to the charity sector.

Everyone is different, so it follows that two people doing the same job will not always perform equally well. Why then should they be paid the same?

This logic was applied at Citizens Advice, where a performance-related pay structure was introduced in 1999. However, it was not the unmitigated success that was hoped for.

Hilary Wallace, HR director at Citizens Advice, explains: "On the face of it, it was a good idea. The difference that a good performer and a bad performer can make to a charity can be significant, and performance- related pay can help motivate and retain staff.

"There was nothing fundamentally wrong with the system; it just wasn't suitable for the environment and the culture here. I think it can work in an organisation where there is more money to make the differentials greater - if there's not much difference between the various levels of pay, it won't spur people on to perform better."

Wallace joined Citizens Advice in 2002 and performance-related pay was scrapped just a year later.

The charity is now looking at other ways of recognising good performance, such as one-off bonuses. However, Howard Rosenthal, HR manager at Thames Reach Bondway, believes that any method of linking performance to pay goes against the basic principles of the voluntary sector. He says: "We believe our staff are motivated and genuinely want to help our clients - the reward is the job itself. If you prefer to work in a culture where the reward is financial, then get a sales job.

"Those who perform well should be recognised, but in other ways, such as being given more opportunities to develop their careers, rather than through pay."

Although performance-related pay is aimed at improving an organisation's financial turnover, it still comes at a price. Normally it would mean seeking the advice of a consultant on pay. There is also the question of how to budget in advance for it.

Helen Giles, HR director at Broadway Pay, questions whether the outlays can even be recouped. She says: "I believe it's a consultant-driven fad that the private sector originally adopted. I have never seen any evidence that it improves performance. In fact, it can be counter-productive. Most line managers are even less likely to be honest about someone's performance if it means they will miss out on their bonus."

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