Managing the bonus culture

With substantial parts of UK banks now owned by the UK tax payer, an investigation has been launched by the Treasury into bank executives bonuses. However, initial reports indicate that contractual obligations may preclude any real action to be taken retrospectively.
 
How is it that major institutions in such a fundamental part of the UK economy can be rewarding the executives of our largest public companies for risk taking behaviour, even when the consequences are loss making?
 
As Lord Mandelson commented yesterday: "They have got to understand the heat, the anger, that many people feel about the mistakes that have been made, and they certainly don't want to see banking chiefs benefiting from past failure. If they want to have incentivised pay, that will have to be linked to their achievements in the future, not what they have done wrong in the past."
 
For once, we agree with Mandy.
 
Any incentive must be carefully planned to drive the behaviours that matter most to your organisation. Incentivising your staff in the right way is the best way to get the most from your organisation. The city bonus culture provides a striking example of how poorly conceived incentives resulted in behaviours that ultimately caused the downfall of some of the UK's oldest and most respected financial institutions.