Another Bonus Farce

August 31, 2007 10:35 AM


No wonder he's laughing


As regular BOM readers will know, the Learning and Skills Council is a complete and utter waste of money.

It presides over the nationalised "skills industry", an underperforming quagmire of 500 separate organisations and bureaucracies which costs us over £10bn pa (see previous blogs here - including video - here, and here).


Worse, the "skills" it produces are not wanted or valued by employers, who constantly complain about its dire performance and have to spend a further £20bn pa of their own money training people properly. Indeed its latest effort- the "flagship" skills project Train to Gain- hasn't even been able to spend its budget allocation because most employers won't touch it with bargepole.

If there was ever a candidate for the chop, this dismal quango is it.

And yet... now, you'd better sit down... its CEO has just been awarded a £36,000 performance bonus.

Yes, you heard right. CEO Mark Haysom was handed the money because "he and the organisation had exceeded their targets".


So just what targets might they have been? Holding more than 100,000 internal meetings? Pushing paperclip consumption to new highs? Nobody knows.


Of course this is by no means the first bonus farce in the public sector. Officials routinely seem to get them whether the organisations they run are performing or not (eg the £20m bonuses recently paid out to bosses at the dysfunctional imploding BBC). All they have to do is make sure the appropriate internal boxes get ticked.


Traditionally, Civil Servants didn't get bonuses. They got their salaries and that was that. But at some point the mandarins obviously looked at the City and elsewhere in the private sector, and decided superior performance there must reflect the payment of bonuses. They concluded that Civil Service performance could be improved by following suit.


But there are important differences.



For one thing, City bonuses originated in the old partnership structures, less as an incentive scheme, and more as a way of de-risking the volatility of earnings. By paying partners- and later employees- a share of the profit in the form of variable bonus, staff costs could be kept more in line with the firm's year to year capacity to pay.



Of course, there was always an element of individual incentive, and this gradually became more important. But as all those Canary Wharf bankers will doubtless discover this Christmas, overall profit is still the key driver.



The public sector is not targeting profit, or any such clearcut objective. Indeed, that's one of its manifold organisational problems.



So there is no transparent and robust linkage back to a real world objective. Just another pile of box ticking that has us paying out more than we need for things we never wanted in the first place.



Public sector bonuses are awarded pretty well irrespective of overall performance. All the indications are that senior management is too weak to withold them even if everyone can see performance isn't up to the mark.



As the BBC spokesman put it, “bonuses are part of staff’s contractual entitlement”. In other words, they're not about incentivising at all, but simply extra salary.


No wonder he's laughing


As regular BOM readers will know, the Learning and Skills Council is a complete and utter waste of money.

It presides over the nationalised "skills industry", an underperforming quagmire of 500 separate organisations and bureaucracies which costs us over £10bn pa (see previous blogs here - including video - here, and here).


Worse, the "skills" it produces are not wanted or valued by employers, who constantly complain about its dire performance and have to spend a further £20bn pa of their own money training people properly. Indeed its latest effort- the "flagship" skills project Train to Gain- hasn't even been able to spend its budget allocation because most employers won't touch it with bargepole.

If there was ever a candidate for the chop, this dismal quango is it.

And yet... now, you'd better sit down... its CEO has just been awarded a £36,000 performance bonus.

Yes, you heard right. CEO Mark Haysom was handed the money because "he and the organisation had exceeded their targets".


So just what targets might they have been? Holding more than 100,000 internal meetings? Pushing paperclip consumption to new highs? Nobody knows.


Of course this is by no means the first bonus farce in the public sector. Officials routinely seem to get them whether the organisations they run are performing or not (eg the £20m bonuses recently paid out to bosses at the dysfunctional imploding BBC). All they have to do is make sure the appropriate internal boxes get ticked.


Traditionally, Civil Servants didn't get bonuses. They got their salaries and that was that. But at some point the mandarins obviously looked at the City and elsewhere in the private sector, and decided superior performance there must reflect the payment of bonuses. They concluded that Civil Service performance could be improved by following suit.


But there are important differences.



For one thing, City bonuses originated in the old partnership structures, less as an incentive scheme, and more as a way of de-risking the volatility of earnings. By paying partners- and later employees- a share of the profit in the form of variable bonus, staff costs could be kept more in line with the firm's year to year capacity to pay.



Of course, there was always an element of individual incentive, and this gradually became more important. But as all those Canary Wharf bankers will doubtless discover this Christmas, overall profit is still the key driver.



The public sector is not targeting profit, or any such clearcut objective. Indeed, that's one of its manifold organisational problems.



So there is no transparent and robust linkage back to a real world objective. Just another pile of box ticking that has us paying out more than we need for things we never wanted in the first place.



Public sector bonuses are awarded pretty well irrespective of overall performance. All the indications are that senior management is too weak to withold them even if everyone can see performance isn't up to the mark.



As the BBC spokesman put it, “bonuses are part of staff’s contractual entitlement”. In other words, they're not about incentivising at all, but simply extra salary.

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