Irish Water Bonus

Irish Water paid bonuses to their employees even if they had a ’Needs Improvement’ rating on their performance Review. You might ask what is so unusual about paying bonuses in a company, don’t all companies do this and isn’t this the way to stimulate performance in a company and from what we have seen of Irish Water so far their performance definitely merits improvements.

Paying bonuses to employees for their performance is counterproductive and doesn’t do anything to increase the performance of employees, the opposite is true.

Repeated research by highly regarded institutes over the last 30 years has proven without doubt that paying bonuses for performance doesn’t work and is counterproductive. Keep in mind the banking crisis; the collapse of a complete sector which paid itself the highest bonuses. If bonuses worked the banking sector should be thriving! 

Any self respecting HR practitioner knows this and would be very careful regarding implementing a bonus culture in a new company. That is the surprising thing about Irish Water, as it is a new company it has all the opportunities to establish a new culture and implement policies which would help it perform, yet Irish Water immediately returned to the failed old bonus culture. It tells me that top management is not focussed on creating a new efficient organisation based on new proven scientific methods but are very focussed on keeping things as they are. This is not very convincing for the executive of a newly formed company assigned with such an important task.

Dan Pink in his book: ‘Drive, the Surprising Truth About What Motivates Us’ reviews the new motivational theories developed over the last 30 years. He concludes that when it comes to motivation there is a gap between what science knows and what business does. Our current business operating system – which is built around external, carrot and stick motivators (performance bonuses) doesn’t work. Science has shown us that the new motivational approach which works has three essential elements 1) Autonomy, the desire to direct our own lives. 2) Mastery – the urge to get better and better at something that matters and 3) Purpose – the yearning to do what we do in the service of something larger than ourselves.

Up to the end of the last century motivation and bonuses were built around external rewards (performance bonuses) and punishments. That worked fine for routine 20^th century tasks. But in the twenty first century this old system is proving to be incompatible with how we organise what we do, how we think about what we do, and how we do what we do. When the carrot and stick approach used for more complicated management roles strange things begin to happen. 

Traditional ‘if-then’ rewards can give us less than what we want. They can extinguish intrinsic motivation, diminish performance, crush creativity and crowd out good behaviour. They can also give us more of what we don’t want; they encourage unethical behaviour, create addictions and foster short term thinking. And that is exactly what is happening at Irish Water at the moment.

The Carrot and Stick approach isn’t all bad. It can be effective for rule-based routine tasks, because there is little intrinsic motivation to undermine and not much creativity to crush. However, this doesn’t apply when you are setting up a new organisation. Then creativity, ethical behaviour and performance are very much in demand.

Modern motivational theory centres on three important elements for employees of a company: Autonomy, Mastery and Purpose. This is what Irish Water should have been focussing on instead of a quick performance bonus which is counterproductive.

If you want to see a youtube video from Dan Pink about this have a look below.

https://www.youtube.com/watch?v=u6XAPnuFjJc

The question of a living wage?

There is a lot of talk about raising the minimum wage in Ireland and bringing it up to a living wage of €11.45. Currently the minimum wage in Ireland is €8.65 and this is the fourth highest minimum wage in the European Union only lower than Luxemburg, France and Belgium and at a higher rate than Germany and the United Kingdom, the economic engine of the EU. The living wage of €11.45 would be higher than the minimum wages in Luxemburg, France and Belgium.

Unions maintain that the minimum wage is too low to make a decent living in Ireland and that is probably true and they propose to increase the minimum age and introduce a living wage which would make it possible for people to live from. A noble thought. 

Furthermore they say an increase of the minimum wage would boost the economy! However the socialist government in France increased their minimum wage to €9.43 in 2012 and the French economy is still in the doldrums.

Mark Fielding of the small and medium employers’ organisation ISME says that employers can’t afford to increase the minimum wage and that if there would be any increase this would have a detrimental effect on the Irish economy. Mark is right a further increase of the minimum wage would put many small and medium size companies to the pin of their collar and would stop any growth in employment. This is practical realism of ISME and Mark Fielding.

Now get me right I am not suggesting to decrease the minimum wage either I am making the point that an increase is now not opportune.

Is there a third option which could square these opposing views? In my opinion there is but it would mean a different approach to industrial relations than we have had in Ireland up to now. Up to now the focus on industrial relations has been very much on wage increases and very little else. Yes there was a broader approach in National Wage Program Towards 2016 however at the first difficulties the other ideas were quickly dropped and the focus was back on wage increases. Wage increase is a topic which is easy to sell for the unions. It is easily understood by their membership that is why it has been so popular.

However establishing the highest minimum wage in the EU, as a struggling economy is in my opinion not a smart move. The case is that with one of the highest minimum wages in the EU, Ireland is not underpaying their employees but the cost of living is too high.

To give a recent example in the last year the charge for peoples renting houses as gone up considerably and the same for house prices. It has increased in such a way that it puts an enormous pressure on the wages of people working with a result they are demanding higher salaries. In a modern society this topic needs to be resolved if an economy wants to thrive for all. Rent controls need to be introduced and social housing needs to be developed. To let the market organise this itself is an out of date approach in a modern European social democracy. Our recent economic problems proved that this approach doesn’t work in the 21^st century.

The government and the social partners need to address this issue and other issues like affordable health care. A broader methodology to industrial relations than just a focus on wage increases would benefit the economy, employees and employers.

Government, unions and employers should take action on this and not drive wage cost up in order to get everybody a Living Wage of €11.45 while still nobody can afford to rent or have decent health care.