When Bonuses Backfire

bonus

Recently, a direct report complained to me that she did not receive a bonus this year. She went on to tell me that she didn’t feel she was appreciated and wondered why she stayed. While I feel for her, I also believe that cash rewards should go to those that perform above and beyond their basic work and she hasn’t stepped up. So, who is at fault? The employee or the organization? That is a tough call.

Our organization has traditionally given out bonuses to anyone with a ‘Satisfactory’ appraisal rating. This sends the message that “you will be rewarded as long as you don’t get caught screwing up”. Message received. Either don’t risk anything or get really good at covering up mistakes. Now that money is tight, cash rewards are given only to high performers. The problem with this sudden shift is that employees don’t know how to work beyond their boundaries because the organization accepted (and rewarded) mediocrity.

But, wait! you say. Aren’t you responsible for helping your direct report perform above and beyond.

And I will say, Absolutely! We are redefining core duties which should make next year better. But as the old saying goes, “You can lead a horse to water but you can’t make him drink.”

I’m just guessing but I bet this situation plays itself out multiple times each year across the country and it can lead to employee disengagement. If employees are suddenly not rewarded for doing the exact same job they did last year and they aren’t told the cause, they tend do less work during the next year. In a majority of these cases, the employee either doesn’t receive a bonus the following year or, worse yet, gets fired, demoted, etc.

If you are a high performer, proactive employee, or a growth mindset person, your first instinct when you’ve been passed over is to kick productivity up a notch. You analyze, ask questions, seek out mentors, and then come up with a plan to get better because, “I WILL GET A BONUS NEXT YEAR!” Fearful and fixed mindset employees don’t view it the same way. They feel judged and devalued. Working harder simply means putting extra cargo on a sinking ship. It is not worth the risk or effort.

So, how can we make things better? Stop doing certain things and start doing other things.

Things to stop doing:

  1. Stop giving bonuses to just anyone. Mainly because when cash flows slow (and they will slow one day), your employees will be ticked off that they didn’t get extra a bonus this year. In fact, they will view it as YOU taking money out of their pocket. You will become the Evil Jerk who ruined Christmas. Thank you very much! A preemptive way to changing your bonus strategy is to use a 2- or 3-year ‘step-down’ plan to slowly cut off the flow of ‘bonuses for breathing’.
  2. Stop telling people that it is a ‘cash flow issue’. It’s not. It is a performance issue. Help the employee get better by telling him/her that the performance is not up to par. They can’t get better if you deflect blame to a cash flow issue. Everyone can compete for the pool of cash but the key word is ‘compete’.

Things to start doing:

  1. Tell employees up front about the change. This is preferably done at the beginning of the performance period so everyone knows that bonuses will only be awarded to high performers. Define high performance and ensure leadership and managers can communicate the differences to employees.
  2. Set stretch goals. No. I mean real stretch goals. Don’t give me that crap about not wanting the employee to feel like he/she is under the gun. If a stretch goal doesn’t seem a little scary, then it is just an achievable goal added to the long list of items the employee is expected to finish.
  3. Provide employees with mentors or training. This is totally a win-win because knowledge is shared (mitigating knowledge walk-out), collaboration teams emerge (primordial ooze for innovation), and performance and productivity increases. The mentors could also have their stretch goals intertwined with their protege’s. Now that is a seriously scary stretch goal.
  4. Give employees opportunities to perform above and beyond. Okay. All of these tips are grand but if you don’t trust your employees to become high performers, how can you reward them at the end of the year. Release your stronghold grip and let the buzzards fly. I’m not sure this is the right phrase but my mom said it to me all the time. And, yes, I was the buzzard.

What other things can we stop or start doing to help our employees get their bonus this year?

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