Dr Zsuzsanna Vargha, University of Leicester School of Management
Date: 25 February 2014
Time: 2.00 -3.30pm
Misaligned incentives for bankers have taken center stage in public and academic discussions of the recent crisis. Taking a theoretical look this paper asks, just how do financial incentives come to exert their (beneficial or undesired) effects in practice? I bring evidence from an ethnographic study of two cases where banks relied on the conventional method of financial incentives to generate selling: a bonus system at a large bank, and pure commission at a Multi-Level Marketing firm. But both firms struggled to make their representatives react to financial reward. This is what the paper explains. The reason, however, was not merely the non-financial motives of employees, the wrong reward scheme, or the wrong measures, as is frequently argued. Rather, the financial incentive had no cognitive effect without an infrastructure that could capture the “point of sale” and deliver it as performance to be rewarded.
The paper identifies the process by which the original financial incentive is gradually transformed into a series of non-financial incentives, ultimately focused on measuring not performance but the use of the documenting technology that was instituted to measure performance. Financial incentivization was successful, and selling ensued only after achieving measurability, through an amalgamation of multiple modes of control. The findings are based on intensive fieldwork (observation and interviews) at Hungarian financial firms during the pre-crisis expansion, now associated with the rise of a large sales force. The episodes discussed shed light on the contingent infrastructures of control that enable financial incentives to operate in practice, and contribute to mapping the relationship between different modes of control.
About the speaker
Zsuzsanna Vargha is Lecturer at the School of Management, University of Leicester and an LSE CARR Research Associate. Zsuzsanna received her PhD in Sociology from Columbia University; she was LSE Fellow at the LSE Department of Accounting and Postdoctoral Researcher at the Max Planck Institute for the Study of Societies. Zsuzsanna’s research interests lie at the intersection of accounting, finance and marketing, using theories and methods from economic sociology. Current topics include everyday risk work; the regulation, management control and process of financial advice; the history of the Hungarian mortgage crisis; the history of Agency Theory; and the accounting information systems of financial regulation.