Salz Review - Wall Street Journal

Salz Review
An Independent Review of Barclays’ Business Practices
130
11. Pay
11.1 Because the business of banking is so associated with money, and because (for some)
the pay of some bankers has come to represent an allegory of bigger issues, pay in
banking stimulates heated debate. Employees come to work for many reasons. But
monetary reward is one of them and employees who work hard, serving customers
and their employer well, are entitled to expect to be fairly rewarded for their talent
and effort. Of course, pay is not everything. Personal recognition, affiliation,
friendship, the opportunity to offer a valuable service, stimulation and challenge
all play a role.
11.2 This is true even in the often criticised investment bank – which Barclays successfully
built over a short period of time, taking advantage of the inherent mobility of the
investment banking workforce. Barclays paid much to achieve this, but pay alone
would not have attracted people to what was – at least at the outset – a less wellpositioned
competitor. Recruits were also attracted among other things by the
prospect of being involved in building a new, edgy business. Nevertheless, pay
matters as much to Barclays staff as it does to anyone else. It is more difficult
however, in investment banking, to be clear about what is fair when the common
view is that the global market for investment bankers is not a reasonable indicator.
What also matters organisationally is how the pay lever is used to support
desired behaviours.
Approaches to Pay
11.3 Many observers believe – as do many of our interviewees – that the banking industry
has treated pay as the primary, and sometimes only, tool to motivate employees and
influence their behaviours. Given that bonuses and incentive payments continue to
represent a material portion of that pay, the structure of bank pay plays an important
role in shaping a bank’s culture. Indeed, many people choose to enter banking,
especially investment banking, for the potential to earn above average levels of pay,
probably realising that they will have to work hard for it.
11.4 Employees learn to adjust their behaviours as they experience the response to those
behaviours. If there are no other significant forms of recognition for good
performance, bonuses for achieving financial outcomes will be seen as the major
organisational response employees experience. Financial outcomes then become
what employees believe the organisation values. Incentive pay systems can be
effective in sending signals about what an organisation values, but studies show that
the motivational effects of pay, especially for complex tasks, can be overstated. 201
11.5 Barclays’ staff emphasised to us that individual financial contribution was the overriding
determinant of discretionary bonuses. Retail branch staff participated in
incentive schemes formulaically linking their pay to their individual sales. And for
senior executives, the highest rewards were available to those participating in long-
201 See Appendix B.