Let's contrast Neil Armstrong, a sports person (footballer, baseball player), and a city trader and whether bonuses would work.

General idea of a bonus is that you get some extra money for hitting some sort of target (cheap jokes about bankers would be easy to write here).

But I often wonder whether they work.  I know they are nice to receive - but do they generate additional effort to get them?

Let's take our list

Neil Armstrong.  Now, I don't know whether he got a bonus for walking on the moon but I'd bet that he would have been no more or less motivated by a financial incentive.

A sports person.  Often sports people are paid win bonuses.  If they win a game they get a bonus.  Strikers in football are often paid more for scoring goals.  I've never understood that one.  Do you change the way you play for the bonus?  Perhaps in a meaningless end of season game, but really does it work?

A city trader.  Now, on a principle level I can see that a city trader's personal goals are likely to be money driven - and so a bonus is likely to motivate them.  But, motivate them to do what?  It needs to be a very well-crafted bonus system that does not drive short-term inappropriate behaviour.

I have rarely seen or experienced a truly motivational bonus structure.  In looking at performance appraisals, I'm starting to craft my thoughts on how a bonus system could work both for the organisation and the individual.  A performance review against objectives may form part of a sensible process.  But its taking a lot of thinking to really ensure that the organisation get what it wants and the individual is not manipulated away from better behaviours than the bonus is likely to generate.

Brendan