LeoliansBro wrote:The problem with this is that monetary incentives have, when compared to a scenario where no bonus is paid, a negative impact on performance.
Banks want it to be a) because it attracts better candidates, and they can flex their cost base more in line with revenues which allows for smoother trading profile and less volatility. Bankers want it because they see the opportunity to earn £500k rather than £300k.
This phenomenon has been observed in a great number of experiments and the date has been reproduced time and again for over five decades now.
Furthermore the increase of bonus pay also leads to a greater decrease of performance.
Extrinsic motivators, such as bonus payments also erode the effectiveness of intrinsic motivators (that is the motivation of doing something right for the sake of mastery).
So even if the better salaries do attract the best people, which is also an assumption that remains to be proven, it would just lead to these people becoming worse as they work at their new work place.
So actually b) would be the better choice in this case.