The recent brouhaha surrounding the bonus payment to Stephen Hester, the chief executive of RBS, raises many interesting questions; not the least of which is how much do you need to pay to secure the services of excellent leaders to run organisations both private and public?

That he hasn't actually taken his bonus should not detract us from asking how much employees - most especially at executive level - really need to be paid to achieve objectives?

In the case of Hester, the argument that was put forward to justify the almost £1million bonus was that this is what the previous government agreed with him in his contract after the departure of the infamous Fred 'the shred' Goodwin.

Given that the government was forced to save RBS by taking majority ownership following the global liquidity crisis of 2007 which, lest we forget, was caused by the hubris of 'spectacularly successful' business leaders like Goodwin, the objective was to ensure that stability returned as quickly as possible.

Hester took the job on the basis that he could do this in five years.

The argument that raged over Hester's bonus was whether in the current age of austerity it is right and proper to pay a bonus to a chief executive of what is effectively a state-owned bank, and who already receives a basic salary of £1.2million, for not achieving his target of achieving a return to success as was apparently promised on his appointment?

Sadly, it seems, the facts of what Hester has achieved (and not) have been lost in the 'wars of words' about what is acceptable within what David Cameron described recently as 'moral capitalism'.

There is no doubt that he has had some success. The bank is now profitable making pre-tax profits of £1.2billion for the first nine months of 2011 following losses of £3.6billion and £1.13billion in 2009 and 2010.

Hester's achievement in reducing RBS's balance sheet by £600billion must be balanced against the fact that its share prices is down by over 40% from a year ago.

We, the taxpayers who bailed RBS out when it could have gone bankrupt, now own 82% of an asset that is worth less than half of the £45.5billion injected to save it.

Hester's clear objective on his appointment was to ensure that RBS's equity value was such that it could be offered back to 'the market' at no loss within five years (and it was hoped a return on investment).

If RBS's share price is used to evaluate Hester's success, it is clear what the market thinks and hence the current controversy concerning his worth.

So how much do you need to pay to ensure success?

Ask any football fan and they will gripe about the greed of football players; particularly those who are regarded as 'world class'.

However, these fans recognise that there is a market for securing the services of the top players.

No-one who acknowledges the continued success of Barcelona Football Club can deny that its manager Josep 'Pep' Guardiola is one of the best. More importantly, it has some of the best players in the world such as the brilliant Lionel Messi.

People as good as Guardiola and Messi don't come cheap. Interestingly, at Barcelona FC the decisions about who to appoint and what pay is required to attract them is taken by the owners who, unlike most other football clubs, are the fans themselves.

Clearly consensus serves Barcelona well. But what does that tell us about running most other organisations which, to be fair, are a lot more complex than football?

Leadership is one of the most analysed and written about aspects of management. As the seminal writer Charles Handy argued in his book Understanding Organisations, the search for the secret of leadership is like the quest for the Holy Grail; an entirely honourable and understandable objective but ultimately fruitless.

Nonetheless, the search for what is really effective and successful leadership goes on regardless.

Offering simple answers about what effective leadership consists of is unhelpful and I am not intending to do so here.

However, in my own research into what creates successful (excellent) organisations, most particularly those regarded as 'world class', the issue of leadership is ever-present.

What is utterly obvious in analysing such organisations, and they exist in both the public and private sector, is that whilst the importance leadership is explicit, every person involved in every process is encouraged (and expected) to play their part. In effect, every person is a leader.

When Dr. Deming Dr. Juran, both of whom I have referred to in an earlier blog, travelled to Japan in the aftermath of its defeat by America, they emphasised the need for senior managers to be responsible for instituting leadership which ensured that improvement became the obsession of everyone.

Critically they both stressed to their audience that they should not follow the Western example of decisions being taken by managers in isolation to the workers who would carry them out.

Deming was especially adamant that the greatest responsibility of senior managers was to motivate by appreciating efforts of those working at operational level and that by working cooperatively the key objective was to understand the causes of problems (what he called 'variation').

Simply blaming people when things go wrong will not help. He advocated the use of simple statistical process control (SPC) to achieve improvement.

The fact that some of the very companies Deming advised in the early 1950s are still regarded as 'best in class' should tell its own story.

But whilst Deming believed that blame never motivates people, he was equally vociferous that linking performance to reward does no good either.

For him, performance-related pay was simply wrong. As he argued, given how little influence senior manager has upon the final results, what is the logic of linking their pay to outputs?

Rather, he advised, managers should, for whatever basic pay they are believed to be worth, take responsibility for developing a system of working (and a culture) in which every person seeks continuous improvement.

It is not hard to guess what the late Deming would have made of the debate surrounding Hester's bonus. He would probably have criticised those who agreed to this as fundamentally misunderstanding his philosophy.

Moreover, he would hardly have approved of a system of remuneration in which basic salaries of senior executives, such as Hester, are routinely paid more than 40 times as much as the median worker in the UK.