Short-Term Bonuses Culture and Instability in Management of Banks

Introduction

The recent economic recession has caused a lot of financial damage to every sector of our society making it very important for us to review each and every aspect of our society so that its major causes can be identified and rectified in order to prevent any future recessions. This dissertation proposal aims at making the readers realize that short-term bonuses have been responsible for the instability of the banks. These bonuses should only be awarded to those managers and employees who display long term performances rather then bringing in short term gains by taking unnecessary risks (Timber 2007).

A number of economic analysts have pointed out that the failure of most banks has been due to the fragility of their short-term policies and bonuses and also their profit oriented nature. Most bankers prefer banking policies that demonstrates apparent profit in shorter terms. (Robins & Krosinsky 2008) They favour regular premiums over a longer period of time but are completely unconcerned regarding such a potential exercise which ultimately results in the bank suffering substantial economical losses and management instability (Rath 2008).

People must understand that banks will not flourish simply if the bankers bring in a lot of short-term profits but they also need to be managed properly. With the instability evident in most banks today, it will be very difficult not only to bring them out of such as tremendous financial crisis but also stop them from collapsing. Further, this dissertation proposal also tries to tell the readers that only when the senior managers realize the objectives and goals that have been set for them can the stability of the banks be brought back. They need to decrease their profit mindedness and strictly follow the goals set for them (Frynas & Pigman 2008).

Aim

The main aim of this dissertation is to understand the manner in which short-term bonuses culture has led to instability in management of banks.

Objective

The major objective of this dissertation proposal is ─

1. To determine the reason for the instability in the management of certain banks that have a long standing culture of providing short-term bonuses to its employees and managerial staff members.
2. To determine how the short-term culture in the banks has led to the near collapse of the entire banking system.
3. To enable the readers to understand the advantages of long-term bonus cultures in banks, which not only has higher process efficiency but also nurtures an environment of stability in the banks.
4. To determine the reasons because of which such a culture supporting short-term bonuses has been favoured in most banks even though it has caused the banks to become instable.
5. To determine the fact that even if an entity employee of a bank generated substantial short-term payback for the bank it does not in and of itself mean that the single member of staff is entitled to accept short-term bonuses.
6. To determine how the short-term bonus culture in banks has led to the biggest economic crisis of this century.

Research question

The research question that is being answered in this research proposal is “How short-term bonuses culture has led to instability in management of banks?”

Hypothesis

This dissertation proposal hypothesis that the bonus culture in most banks is causing the management to become instable. It further hypotheses that since the managerial staff become aware that no matter what happens they will receive their bonuses, their quality starts to deteriorate which gets reflected in the way they manage the banks. Short-term bonus cultures in banks have not only led to the instability in the management of banks but are also the root cause for the credit crunch which has devastated our economy. This research has been mostly based on the misconception in the type of financial risks that have been taken by most banks through an expanded observation of the efficiency of their existing risk models along with an inaccurate observation of the bonus culture and issues that are facing most of the financial institutions, i.e. banks, today (Asaf 2004).

The short-term bonus culture that exists in most banks today have encouraged the less experienced employees to take excessive risks at the cost of the banks leading to instability in their management and also a financial crisis. Short-term bonuses offered by most banks have proved to be drivers of irresponsibility, short-sighted behaviour and greed among the employees of the banks leading to a total mismanagement in its working. At the height of the financial crisis facing the world it has become completely evident that short term bonuses are the main culprit behind the failure of most banks since they lure the top bankers responsible for managing the big banks into publicly wasteful investments (Regester, 2007).

Expected outcome

The relevant and expected outcome of this research proposal is that short-term bonuses cause a drop in the performance and quality of the employees of the banks. As they get more involved with somehow meeting their productivity goals, they work very fast but this negatively affects their quality. Their mentality changes as they know that if they increase their productivity they will get a bonus, no matter what (Berk 2007).

Such a short-term bonus oriented culture in the major banks has led to their excessive lending strategies and their belligerent expansion policies due to which their internal management policies have weakened, destabilizing the overall management of the banks. Not only has such a culture led to the collapse of some well renowned banks but has led our economy to a great recession which it has not yet been able to come out of (Pickett 2007).

There is a universal feeling which believes that short-term bonuses invite the managers and bankers to take high risks because they have a very asymmetric payment structure. The eventual outcome of such a situation is that if the high-risk investment made by the manager or banker becomes successful, then they are awarded with a generous compensation. But by chance if the high-risk investment fails even then the banker or manager involved enjoys his or hers fixed salary. Such a situation has caused a number of banks to become bankrupt since the bonus compensation culture in these banks failed to penalize critical recognitions of uncertain investments (Robins & Krosinsky 2008).

Bibliography

1. Adams, C 2006, ‘AFRICA: Standard Chartered/First Africa’, Africa Research Bulletin: Economic, Financial and Technical Series, vol. 43, no. 6, pp. 17010A-17010B.
2. Asaf, S. (2004) Executive corporate finance: the business of enhancing shareholder value. London: Financial Times/Prentice Hall.
3. Berk, B. J. (2007) Corporate finance. London: Pearson Addison Wesley
4. Chaudhry, S & Crick, D 2007, ‘Attempts to more effectively target ethnic minority customers: the case of HSBC and its South Asian business unit in the UK’, Strategic Change, vol. 13, no. 7, pp. 361-368.
5. Crouhy, M. (2000) Risk Management. LA: McGraw-Hill Professional
6. Frynas, G & Pigman, A 2008, ‘First mover advantages in international business and firm-specific political resources’, Strategic Management Journal, vol. 27, no. 4, pp. 321-345.
7. Grosse, D. (2008). Microsoft implements readiness as a strategic force. Global Business and Organizational Excellence, 27(5), 41-48.
8. Hutter, B, & Power, M 2005, Organizational encounters with risk, Cambridge University Press, London.
9. Klein, D. (2009). Emerging technologies and corporate culture at Microsoft: a methodological note. Behavioral Sciences & the Law, 23(1), 65-96.
10. MacCormack, A. (2009). Management of Technological Transitions: Evidence from Microsoft Corporation. Journal of Product Innovation Management, (26)3, 248-263.
11. Marar, P, Iyer, BS & Brahme, U 2009, ‘HSBC brings a business model of banking to the doorsteps of the poor,’ Global Business and Organizational Excellence, vol. 28, no. 2, pp. 15-26.
12. Nottage, L. (2009). Corporate Governance in the 21st Century: Japan.s Gradual Transformation. New York: Edward Elgar Publishing.
13. Pickett, KH 2007, Banking management: Investments and risks, Wiley, New York.
14. Pickett, KH 2005, Auditing: the risk management process, Wiley, New York.
15. Regester, M 2007, Bonus in Management, Kogan, LA.
16. Regester, M 2005, Risk issues and crisis management a casebook of best practice, Kogan, LA.
17. Robins, N & Krosinsky, C 2008, ‘After the credit crunch: the future of sustainable investing’, Public Policy Research, vol. 15, no. 4, pp. 192-197.
18. Rath, T 2008, Leadership Without Borders: Successful Strategies from World-Class Leaders, John Wiley and Sons, London.
19. Stern, J. M., & Chew, D. (2003). The Revolution in Corporate Finance. New York: Blackwell.
20. Suder, G.S. (2008). Interview with Jean-Philippe Courtois, CEO, Microsoft EMEA. Thunderbird International Business Review, 47(2), 153-161.
21. Suder, G. (2009). Microsoft: A case in cross-company transformation. Thunderbird International Business Review, 48(4), 555-596.
22. Timber, S 2007, Standard Chartered Bank: Analysis, ABT Ltd., Kolkata.

Literature review

Introduction

Short-term bonuses or incentives are often offered by firms and organizations for attracting and retaining their top performers, motivate the behaviour of the desired employees and for managing compensation costs. Short-term bonuses are not a permanent part of an employee’s salary or basic pay and thus it varies in quantity from time to time. This research article discusses the fact that such a short-term bonuses culture in most banks today has led to instability in their management. The banks pay their employees a huge incentive when they experience huge profits and also pay them when they have to go through horrendous loses (Grosse 2008). They pay them since it was promised to them with the fear that if they do not do so then they might eventually loose the employees. But such big short-term bonuses during such a time of economic crisis have proved to be nothing more than the perfect formula for the instability of the banks. The short-term bonus culture that has been established by the structural changes within most banks over the last 3 decades has directly contributed to our present financial hardships (Marar, Iyer & Brahme 2009).

Changing nature of risk taking in banks

Till 1970s the principle forms of risks that were taken by the banks included speculative trading and partnerships where the partners were allowed unlimited liabilities. Depending completely on the discretion of a partnership, the employees of a bank were awarded their bonuses (Klein 2009). Only those employees who produced a significant amount of profit were well paid and also entitled to bonuses but those who produced losses were not given any bonuses. They were blacklisted and often dismissed. Bankers possessed a keen sense of risk since the failure of a bank meant their own personal bankruptcy. There were no tax payers who could bail out the banks from their crisis situations and stop them from collapsing. But with time partnerships have almost disappeared and the principle institutional structures in banks nowadays have become their limited liability corporation. Such a transformation is one of the main reasons that have led to the culture of short-term bonuses in banks since it significantly cuts down the incentive of the bank’s senior management to supervise risk taking and management making it substantially instable (MacCormack 2009). The banks that get engaged with speculative trading have to confront the inherent danger of its less experienced managers taking a lot of unnecessary risk which can even threaten the basic establishment of the firm.

Problem with short-term bonuses

Although short-term bonuses have certain advantages, like attracting and retaining the high performers and critical employees, they create a lot of challenges due to which the management in the banks are faced with instability. In order to meet and exceed the productivity standards that have been set by the banks and receive the incentives most bank employees work rapidly to meet their goals due to which a drop in their quality or performance is noticed (Hutter & Power 2005). Once the employees realize that they will get a short-term bonus at a regular interval, regardless of how they perform, an entitlement mentality gets set in their minds which indirectly affects the management of the banks. If the quality and performance of the employees of a bank deteriorate then there will be instability in the management of the banks (Robins & Krosinsky 2008).

Short-term bonus culture has led to the instability in the management of banks since it has encouraged activities that involve high risks. The banks take high risks to make spectacular profits and due to this its management and employees gain their short-term bonuses. But if the banks have to go through losses then its employees and management staff do not have to shell out or forfeit from their own pockets and, at the same time, they do not lose any of their previous bonuses (Chaudhry & Crick 2007).

The reason why the managerial staffs is not able to properly manage the banks is because according to the banks if the employees are able to produce spectacular short-term gains then the bank defines it as good performance. But what they fail to realize is that most of the employees who are rewarded with bonuses produce those short-term gains by taking unnecessary risks at the expense of the bank (Robins & Krosinsky 2008). Such short-term gains causes harm to the banks in the long run rather than bring profit since they amass longer term dangers. Due to such reckless actions of the employees and mistake on behalf of the banks in rewarding those reckless actions, a lot of problems have been created in not only managing the banks but also in our economy which has even led to a complete economic depression (Vishwanath 2007). Once the management staffs realizes that they are to receive bonuses they become indolent since they do not have to meet any performance targets set by the banks. Only those employees who have long term goals will want to stay in the banks and manage it properly (Regester 2005).

Short-term bonus cultures and schemes in the banks need to end if they want to do away with the instability of their management. Such a culture only instigates a pump-and-dump mentality due to which the banks encourage short-term profits as long as the economy and their management stay stable. The short-term bonus cultures in most banks are symptomatic of the shorter term strategies that most banks are opting for. This further leads to insufficient policies being integrated in their management systems causing their instability and sometimes even their collapse (Robins & Krosinsky 2008). Most banks offer short-term bonuses with the intention of retaining their top managers but the attraction of instant remuneration and short-term growth has led to the movement of most executive managers of certain banks to other banks that offer higher bonuses (Nottage 2009). Executives who have newly joined banks immediately try to find out ways of cost cutting, even if it hampers certain managerial decisions of the banks, so that the banks profit can be relatively increased and they, in turn, get instant rewards. Due to cost cutting and implementation of newer strategies, the senior managers are not able to properly play their roles and the bank cannot pursue their coherent strategies intended for longer terms, especially in systems integration (Pickett 2005).

Even in a time of recession short-term remunerations have become unavoidable since they were previously guaranteed by the banks to their employees in response to profits that the employees had produced in the past. Bank managers and employees must ensure that the short-term bonus culture that they follow is consistent with the effective risk management schemes that have been designed especially for that particular bank. (Stern & Chew 2003) A number of economists have found that the culture of short-term bonuses followed by a number of banks is among the major reason that has contributed to the economic crisis facing our economy today. In order to re-establish the stability in the management of our banks today, they need to understand that senior managers need to be retained back since they have much more experience then the junior ones. And for this banks need to have long-term strategies which will discipline the risk takers (Marar, Iyer & Brahme 2009).

Another major reason for the instability in the management of the banks is that the short-term bonus culture has created a discrepancy between the interests of the banks and their management staff. When a banker maximizes the bank’s short-term remunerations the bank will be faced with the significant probability of having to incur huge future losses. For a short time the banks enjoy an attractive interest rate but are unable to repay the full principle in case a contingency takes place. Such short-term profits may appear to be remunerative for the bank but actually the ultimate consequence is that the bank has to suffer massive reputation damage, instability in its management and sometimes even lawsuits eventually leading to its collapse. The central element of healthy banking gets destroyed along with people’s investment in there trust and goodwill (Suder 2008). The short-term bonus culture in banks has permeated into almost every banking activity. Certain basic banking activities, like the acquisition of long dated fixed income assets along with their funding and financing with the short-term low cost deposits have been subjected to the bonus compensation of most bankers (Woodhead 2008).

Affect of short-term bonuses on banks and economy

After observing the situation at first it was observed that bonuses adversely affected the behaviours of senior managers responsible for the internal management of the banks. But the impact of short-term bonuses is far more controversial and also ideologically charged than just their affect on the behaviour of senior managers. The compensation packages that have been designed for these bankers are such that they actually take advantage of the short-term bonuses that are given to them which in turn becomes detrimental for the bank. (Robins & Krosinsky 2008) Although bonuses and incentives were actually intended for retaining and motivating the top performers at the banks, it has been found that the reason short-term bonuses pose such a huge problem is because the employees and less experienced managers at the banks do not view short-term bonuses to be a part of their work and business. Rather, to them short term bonuses have become the business itself and not a remuneration for a job which they have done well (Crouhy 2000).

Bonus culture in banks and the economic crisis

The bonus culture in the banks has led to the instability in the management of the banks which has further caused the biggest economic crisis of this century. The problem with the ongoing payment of short-term bonuses in most banks that have been receiving the support of the public consists of the specific manner which is being used to bail out the banks that are in financial crisis. It is completely absurd that the banks have to retain the services promised to its employees in the form of short-term bonuses even when the banks are facing financial crisis and receiving public support. As the banks are loosing money it leaves no room for the justifications of payment of short-term bonuses (Suder 2009). The recent economic crisis brutally reminds us how fragile the internal working of banks is. The managers of the banks need to acquire insurance in times of systemic crisis so that incentives are created for them as a result of which they show concern about the stability of their banks (Timber 2007).

Risks taken and short-term bonuses

Those banks which have been ravaged by religiously following a short-term bonus culture needs to review their proposals and policies so as to stop such a devastating practice. They need to come up with advanced ideas focusing on the central element of risk sensitivity. They should choose the appropriate technique for adjusting the capital for risk and profit which is most suitable for their existing circumstances. (Suder 2009) By doing this they can adjust their expectation to the risks taken and not outcomes and yet the short-term bonuses are paid based on the outcomes. Had the banks adjusted their risks based on the outcomes they would have had to face even more instability and would have doubled their jeopardy. The problem here is that banks can gain very little knowledge from the outcomes about the risks which they have incurred in order to achieve the outcome itself (Marar, Iyer & Brahme 2009).

The high risks that are taken by most banks result in their high default probability along with a high proximity to bankruptcy (Robins & Krosinsky 2008). Short-term bonuses at banks need to be supervised specially in such a crisis situation so that risky investments that have led to the instability of banks can be discouraged. In the United States of America, the Wall Street Banks were paid a total of $18 billion in the last year during which the financial sector required almost $1 trillion, for its bailout, from the US taxpayers (Marar, Iyer & Brahme 2009). This is absolutely alarming and also shameful. There appears to be a consensus where such an asymmetric payment structure often makes bonuses to be like a vehicle of private profits for the bankers and socialized loss for the bank itself. Such a view neglects to consider the fact that bonuses should be based on an employee’s performance criterion which is ideally and typically outside the control of management (Rath 2008).

Conclusion

In order for banks to improve their situation they too need to take certain steps they need to review and rectify the internal incentives and compensation policies so that the short-term incentives can be adjusted based on longer terms. Since their management systems are extremely profit oriented and, thus, short-sighted, they need to try and reward the employees based on their sustainable performances and other criterions like volume gathered across a longer and steadier sampling period and their average rate of growth (Suder 2008). Since the bonus culture cannot be completely dispensed in day, senior managers need to realize how to effectively use bonuses as an instrument for guiding those under them in order to bring back the stability in the banks. Suspending the bonus payments of bankers and managements can be viewed as a temporary measure of crisis management in the banks which are technically bankrupt. But in order to establish a culture favouring long terms the banks need to design compensation and bonus packages that are stability oriented in order to reinforce their stable management and financial architecture (Frynas & Pigman 2008).

The bonus culture has now been completely embedded in the market conventions and has been unreasonably linked in the minds of numerous people as being the association between the efficient and free market. But the situation is not like that. Most of the banks are mutually dependent and closely associated with their arrangements being ubiquitous. The regulations to be imposed on banks explicitly needs to consider the impact it will have on the employees of the bank, both on the senior managers who will be monitoring the inexperienced risk takers as well as the junior and less experienced managers who are directly associated with risk taking. Senior managers who are more responsible for the stability of the banks need to defer a significant part of the short-term bonus promised to them over a longer time period so that the amount can be directly related to the long-term fortunes of the banks (Suder 2009). Apart from this, in order to bring back the stability in the management of the banks, those senior managers who are getting public assistance must drop all of their remitted bonuses (Marar, Iyer & Brahme 2009). Even the short-term bonuses of the junior employees need to be regulated so that the management can check the incentives for any gaming. The banks need to revise their structures since a bonus driven payoff structure will result in the instability in the management of the banks since it possesses a lethal combination of excessive and reckless risk taking by the employees of the banks. The clear failure of the remuneration committee in the banks becomes evident where the non-executive directors are more than willing to authorize the racketing of most of the senior managers’ incentives while at the same time they are setting a comparatively unchallenging performance target (Adams 2006).

Bibliography

1. Adams, C 2006, ‘AFRICA: Standard Chartered/First Africa’, Africa Research Bulletin: Economic, Financial and Technical Series, vol. 43, no. 6, pp. 17010A-17010B.
2. Asaf, S. (2004). Executive corporate finance: the business of enhancing shareholder value. London: Financial Times/Prentice Hall.
3. Berk, B. J. (2007). Corporate finance. London: Pearson Addison Wesley
4. Chaudhry, S & Crick, D 2007, ‘Attempts to more effectively target ethnic minority customers: the case of HSBC and its South Asian business unit in the UK’, Strategic Change, vol. 13, no. 7, pp. 361-368.
5. Crouhy, M. (2000) Risk Management. LA: McGraw-Hill Professional
6. Frynas, G & Pigman, A 2008, ‘First mover advantages in international business and firm-specific political resources’, Strategic Management Journal, vol. 27, no. 4, pp. 321-345.
7. Grosse, D. (2008). Microsoft implements readiness as a strategic force. Global Business and Organizational Excellence, 27(5), 41-48.
8. Hutter, B, & Power, M 2005, Organizational encounters with risk, Cambridge University Press, London.
9. Klein, D. (2009). Emerging technologies and corporate culture at Microsoft: a methodological note. Behavioral Sciences & the Law, 23(1), 65-96.
10. MacCormack, A. (2009). Management of Technological Transitions: Evidence from Microsoft Corporation. Journal of Product Innovation Management, (26)3, 248-263.
11. Marar, P, Iyer, BS & Brahme, U 2009, ‘HSBC brings a business model of banking to the doorsteps of the poor,’ Global Business and Organizational Excellence, vol. 28, no. 2, pp. 15-26.
12. Nottage, L. (2009). Corporate Governance in the 21st Century: Japan.s Gradual Transformation. New York: Edward Elgar Publishing.
13. Pickett, KH 2007, Banking management: Investments and risks, Wiley, New York.
14. Regester, M 2007, Bonus in Management, Kogan, LA.
15. Robins, N & Krosinsky, C 2008, ‘After the credit crunch: the future of sustainable investing’, Public Policy Research, vol. 15, no. 4, pp. 192-197.
16. Rath, T 2008, Leadership Without Borders: Successful Strategies from World-Class Leaders, John Wiley and Sons, London.
17. Stern, J. M., & Chew, D. (2003). The Revolution in Corporate Finance. New York: Blackwell.
18. Suder, G.S. (2008). Interview with Jean-Philippe Courtois, CEO, Microsoft EMEA. Thunderbird International Business Review, 47(2), 153-161.
19. Suder, G. (2009). Microsoft: A case in cross-company transformation. Thunderbird International Business Review, 48(4), 555-596.
20. Timber, S 2007, Standard Chartered Bank: Analysis, ABT Ltd., Kolkata.
21. Vishwanath, S. (2007). Corporate Finance: Theory and Practice. New Delhi: Response Books.
22. Woodhead, R.M. (2008) “The conditioning effect of objective decision-making on the client’s capital proposal”, Engineering Construction & Architectural Management, 7, 3, 300-306.

Method

Introduction

The methodology used in this report is the qualitative method. This method tries to analyze the given data which is generally word, pictures or objects in order to gain a through understanding of certain behaviour and the different reasons that causes such behaviours. On the other hand, the quantitative method mainly involves a systematic and logical investigation of phenomenon having quantitative properties along with their relationships using numerical data. The main objective of this method is the development of a particular hypothesis or theory concerning the natural phenomenon (Creswell 2003).

Pros and cons of Quantitative Research

Pros

1. Thorough testing and validation theories are already constructed about why and how the phenomenon has occurred.
2. Even before the data is collected the testing hypothesis can be constructed.
3. If the data given has been based upon random samples but are of sufficient size, then the research findings can be easily generalized.
4. Using this method one can generalize a research finding after it has been repeated on a number of dissimilar populations and sub-populations.
5. This method is extremely useful for acquiring data which allows one to make quantitative predictions. (Yin 2003)
6. Allows a quantitative researcher to construct such a situation where elimination of a number of variable that have confounding influence, is possible. Thus, one can more tenably demonstrate a cause and effect relationship.
7. Collection of data using one of the numerous quantitative methods is comparatively quicker.
8. Through this method we can obtain numerical data that is precise and quantitative.
9. Since the data given is analyzed using some statistical software, it comparatively consumes lesser time.
10. The researched results, like statistical significance, are comparatively independent of the actual researcher.
11. Quantitative research has a higher credibility rate among a number of people, especially those in power, like politicians and administrators.
12. This method is extremely useful when analyzing a huge number of people.

Cons

1. The categories that may have been used by the researcher might not be able to actually reflect the understanding of the local constituencies.
2. Since the researcher focuses more on hypothesis and theory testing instead of focusing on hypothesis and theory generation or confirmation bias, he or she may miss out on the actual phenomenon that takes place.
3. The theories that may have been used by the researcher might not be able to actually reflect the understanding of the local constituencies.
4. The knowledge that is produced as a result of this method is sometimes too abstract or too general for directly applying to a particular localized situation, individual or context. (Creswell 2003)

Pros and cons of Qualitative Research

Pros

1. The data that is used is based on the individual categories of meaning of the participants themselves.
2. This method is extremely useful when analyzing, in depth, a very limited quantity of cases.
3. Using this method, researchers are able to perform cross-case analysis and comparisons.
4. This method is very helpful when describing a set of complex phenomenon.
5. Allows one to opulently describe the phenomenon with proper details as they are embedded or situated in their local context
6. This method provides us with individual case data.
7. Using this method a researcher can almost every time identify the setting and contextual factors as and how they are related to that particular phenomenon of interest.
8. This method provides us with a description and through understanding of the individual’s personal experiences of a certain phenomenon being analyzed, i.e. with the insider’s viewpoint or emic’s account.
9. Allows the researchers to study any dynamic processes, like documenting changes and sequential patterns
10. Helps to find out how constructs, like IQ or self esteem, is interpreted by the participants. (Yin 2003)
11. This method allows the researchers to employ basic qualitative methods of established theories for inductively generating an explanatory but tentative theory regarding the phenomenon being analyzed.
12. In qualitative research the data used is normally gathered in naturalistic settings.
13. Qualitative methods are much more responsive to the needs of a stakeholder and local situations and conditions.
14. Qualitative data gathered from the words of the different classes of participants contribute to the exploration of why and how a particular phenomenon takes place.
15. Qualitative researchers are particularly receptive to the changes which take place when the analysis is being conducted, mainly during any extended fieldworks, and thus, as a result of this there may be a shift in the focus of their analysis.
16. We can use an important case study for vividly demonstrating the particular phenomenon to the individual reading the report.
17. Helps to establish idiographic causation, i.e. establishing the causes of a specific phenomenon

Cons

1. The knowledge that is produced through this method may not broadly include other settings or individuals. The findings may thus be completely unique and only relative to those who were a part of the research analysis.
2. It is quite difficult to establish quantitative predictions.
3. It is even more difficult to test theories and hypotheses that have a huge participant pool.
4. When compared to quantitative research methodology, qualitative method takes more time in collecting the required data.
5. Has a lower credibility ratter with certain commissioners and administrators of program.
6. Data analysis used in this methodology normally consumes a lot of time.
7. The idiosyncrasies and personal biases of the researcher can easily influence the results of the analysis. (Creswell 2003)

Pros and cons of Mixed Research

Pros

1. This method can use narratives, words and pictures for adding particular meaning to the numbers. Conversely, the numerical data can also be used for adding precision to the narratives, words and pictures.
2. Possesses the research strengths of both the qualitative and quantitative methods, as given above
3. Allows researchers to generate and analyze an established theory.
4. Since, the researcher is not limited to a specific approach or a single methodology, using this method the researcher can obtain a broader and a comprehensive array of research questions.
5. The researcher can easily utilize the strong points of an additional methodology for overcoming the weaknesses present in another methodology simply by fusing both in the research analysis, i.e. by implementing the “principle of complementarily”.
6. Since it is a combination of both quantitative and qualitative methods, the mixed method increases the overall ‘generalizability’ of a result.
7. By converging and corroborating the findings of the analysis one can easily provide better and stronger evidence to support the conclusion, i.e. the “principle of triangulation”.
8. Helps to add understanding and insight that may have been missed out during the implementation of only a single methodology
9. Using qualitative and quantitative methodologies together gives us a comprehensive knowledge that is required to connect theory with practice. (Yin 2003)

Cons

1. It becomes very complicated for a single researcher to perform both the quantitative and qualitative researches, on his own, mainly 2 or more methodologies are expected to be performed concurrently. Thus, for performing the mixed method one needs a research team.
2. Mixed method is more time consuming then either of the quantitative or qualitative methods.
3. The researcher should have proper knowledge about the multiple approaches and methods or needs to learn them so as to understand the appropriate manner of mixing them.
4. Methodological purists have often contended that one must always perform researches within either a quantitative or qualitative framework instead of mixing both of them.
5. Mixed method is more expensive then either of the quantitative or qualitative methods.
6. Some details pertaining to the mixed method researches are yet to be fully figured out by the research methodologists, like the problems with paradigm mixing, the method of qualitatively analyzing quantitative data, procedure of interpreting conflicting results. (Creswell 2003)

Why Qualitative method is best suited for this research

Qualitative method is better suited for this research because by using this method one can properly investigate the “how” and “why” of decisions made and not just the “when”, “what” and “where”. Also, for such a research we do not have large random samples and by using the qualitative method we can totally focus on the small samples that are necessary for such a research. Also, qualitative method is better suited here since the aim of the research, i.e. fining out how the short-term bonus culture has caused instability in the management of banks, is complete and does not require us to classify or count the features as with qualitative research. Also since such a research project is in its earlier phases and we roughly know what is required, qualitative and not quantitative method is better suited in such cases. We have also seen that the design of the research paper emerges as we study the given data as with qualitative method, rather than carefully designing the entire research study even before collecting the data, as with quantitative method.

Bibliography

1. Creswell, John W. (2003) Research design: qualitative, quantitative, and mixed method approaches, London: Sage.
2. Yin, R.K. (2003) Case study research: design and methods, London: Sage.