Why the discrepancy? Most companies tie bonus awards to individual performance only loosely, if at all. That’s true even in organizations with so-called performance-based pay plans.
The last Towers Watson Global Workforce Study to address this topic, in 2012, found that only slightly more than one-third (36%) of U.S. employees surveyed see a clear link between performance and pay, including bonuses, and workers are becoming more skeptical about such a connection.
When every employee in a company or at a given salary grade receives the same incentive pay, people are rewarded merely for showing up. Such bonuses waste time and money because they tell employees to do just enough to stay on the payroll. These non-performance-based bonuses do not improve productivity, quality, customer service or creativity. They also breed an entitlement mentality.
Bonuses themselves aren’t the problem. Money can be a significant positive reinforcer, generating outstanding financial results, morale and teamwork, if used in the right way.
To be effective, bonuses must be strongly and specifically connected to an individual’s performance and must reinforce desired behaviors.
These steps can help make bonuses more beneficial to your company and its people.
Following these recommendations will not only make bonuses more meaningful and improve individual performance but also provide other advantages. At ADI, the shift to monthly bonuses in particular has helped the team work smarter and saved management time. What’s more, understanding how their work affects monthly results and profits has increased employee engagement and satisfaction.
On a related note, it’s also important to remember that money isn’t the primary motivator for everyone. As discussed in this video, managers need to learn what reinforces each individual and apply those unique motivators for optimal engagement and productivity.
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