13th January 2012
But bankers are being urged to slash their bonuses in the latest crackdown on excessive pay, say reports. With the UK economy on a downward spiral, there needs to be a clear shift when it comes to industry performance incentives.
There are very few banks hiring and most are cutting jobs, so isn't it time incentives were focused on inspiring industries with the potential for growth? But what are these, and what type of incentives would work?
Mindful Money asks: Which industries should the government focus on, and what incentives might rescue the UK economy?
Brian Dennehy, wealth manager at Dennehy Weller & Co says: "The UK economy has been far too dependent on financial services and sectors dependent on debt. There are some big brains working in City institutions – if even a small portion of these went into industry, their intellects could be a powerful driver for a renewal of UK manufacturing.
"Manufacturing is the key – making stuff people want, particularly making it for the world economies that will be growing over the next few decades, Asia and emerging markets. Serious tax breaks for capital investment is a no brainer – companies sitting on lots of cash will be very tempted."
He adds: "If we have centres of excellence for sports, why not for tomorrow's top industry management? Create a production line of management apprentices – not just those with big brains (based on A* A levels and 1st class degrees) but also those with ideas and fire in their belly – the sort that just needs harnessing. Dare I say it, but Alan Sugar wouldn't be a bad judge of the latter!"
Invest in fast-growing young businesses
SMEs and entrepreneurs were handed some reason for cheer in the Chancellor's Autumn statement, with the announcement of access to cut-price bank loans. But given these companies are the ‘engine of the economy', more thought needs to go into these – or specifically, trust.
Julie Meyer – online "dragon" for the BBC's Dragons' Den, chief executive of the investment firm Ariadne Capital, and a member of the Entrepreneurs' Forum, says on LondonLovesBusiness: "The government must end its Santa Claus-type game that it continues to play, of handing out more money to individual enterprise programs or infrastructure projects. None of these programs will work. In 13 years of working with fast-growing young businesses, I've never once heard anyone claim, ‘Were it not for X, Y or Z government program, I wouldn't be a business success'. The government needs to focus on doing less and getting out of the business of running things. Politics cannot keep up with economic forces.
"Government should not try to figure out which projects to back, or which teams to back. The ultimate confidence move would be to trust British people to build the right companies, spend with their own money, and invite investors from around the world in to back our projects. By enabling people and businesses to keep more of their own money by small business tax holidays and lower income tax, business owners and citizens would build and spend. When they do, they create growth."
Internet start-ups specifically…
Ning-Li, serial entrepreneur and co-founder of Made.com:
"George Osborne should be focusing on the service sector and internet start-ups as these have the potential to grow rapidly. He should steer away from heavy industries as they are capital intensive. Internet based companies are easy and cheap to start.
"Cloud computing has made it so much simpler for people to start a business and there are huge opportunities there for companies. The game is changing too rapidly for the big players; it is the young start-ups that are able to react to changes in technology, mobile, i-Pad and social media.
"The other area to focus on is education, as this is what ultimately drives innovation. When you look at the macro-economic picture countries are starting to specialise more and more and Britain is exceptionally strong in innovation and design. We should play to those strengths."
Incentives for Creatives
Steve Henry, advertising creative and founder of HHCL and LondonlovesBusiness columnist, says:
"The government should invest in the creative industries. Britain is still a global leader in this sector, but only just, and creative people ‘make' stuff out of difficult situations.
"At a conference I attended recently various speakers talked about the emerging markets – the massively growing middle classes in China and India etc. They're going to have global economic dominance for the next 20 years, so let's invest in British perversity and originality.
"Also, let's teach everyone to write computer code and then everyone can create. The government could fund this investment by implementing the Robin Hood Tax [financial transactions tax] and legalising drugs in order to generate tax revenue.
"In the advertising sector George Osborne should cut back on regulations, create tax breaks for training initiatives, talk up the industry and put government money into marketing.
"The government used to be the biggest advertiser in the country, and then they decided to cut back. But history shows again and again that brands which invest in marketing come out of a recession in a much better shape than those that cut back.
"Britain as a brand will suffer unless it has a proper marketing budget."
What motivates people in general?
Of course money isn't the only tool you can use to motivate people – as these comments demonstrate. Motivation is a very individual thing. The subject is complex, but there are some key incentives that most of us strive for.
Mindful Money's psychologist blogger Kim Stephenson says: "What makes people happy is individual to each person and usually has very little to do with money. But we don't really believe that. So we tend to chase one of four things – status/ power, love, security, and freedom, and this BBC article – ‘Rich with a Social Conscience' highlights that happiness isn't about money but people just don't get it. Usually with bankers, they're chasing status – the bigger the bonus, the office, the bank – the more status.
"The trouble is, there is always somebody with more money/status. There is always somebody who has more possessions, a bigger pension, more money/security, somebody who has more love/hangers on/idolisation, somebody with more freedom. So we want more. If you want to incentivise people, most people will be motivated by one of those, they want more status, freedom, etc – whether they can buy it or measure it with money or not. But does that make them do their "best" work? If you get more status by cutting costs and you do that by creating redundancies and getting the others to work harder, is that the best? Nobody knows, but we do know that, ultimately, it won't make any of the people happy."
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