‘Tis the season
With most companies’ financial years ending in December or March, we are in the season of the annual bonus payment; employees up and down the country will be finding a welcome little extra in their bank accounts over the next few months.
Companies run annual bonus schemes to help motivate employees, by giving them targets to work towards and rewarding their achievement and sharing the company’s success, if they hit them.
Does your bonus motivate?
Understanding of bonus schemes is key to your employees’ motivation and how much they value their bonus. They need to know what it is, how they can influence it, and why they have received the reward. In reality, most companies just don’t talk enough about their bonuses to make them effective.
Have a look at the following questions and consider how many are true for your organisation:
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Did your company communicate the bonus targets in the first month of the year?
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Did your company provide any updates on progress against targets through the year?
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Do your line managers discuss these targets directly with their employees?
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Do you think your employees believe they can influence the outcome of the targets?
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Does your company confirm an employee’s bonus payment in person, i.e. via a manager?
If you’re slow to confirm the targets for a bonus scheme, and if you don’t talk about them during the year with employees, then they are ‘out of sight, out of mind.’ This means your bonus scheme is not motivating performance throughout the year.
Moreover, if employees don’t understand how they can influence the achievement of bonus targets, managers don’t discuss targets with them or if individual context to the bonus isn’t given, then employees won’t understand why they’ve earned it and they won’t fully value it. Of course employees will appreciate the extra money in the pay packet but that feeling will fade quickly and be forgotten until the next bonus rolls round.
How to make your bonus work
Bonuses can be a large cost for companies and considering companies with better employee engagement have 2.5 x greater revenue growth than companies that score low for engagement, there’s a powerful incentive to ensure your bonus scheme gives your company maximum value for money.
So, we should be thinking about how recognition actually works. Most HR professionals are familiar with Maslow’s hierarchy of needs, but where does bonus fit into it?
Maslow’s Hierarchy of Needs (and where recognition fits); copyright Bersin & Associates
People are motivated when they feel valued by their organisation. Your bonus scheme should be fulfilling the ‘Esteem’ need by recognising their achievements on behalf of the company and showing them their importance to it. But if an employee doesn’t know why they have received the bonus and has only had a non-personalised communication to confirm the award, then the scheme can’t support that need and, at best, is relegated to the ‘Safety’ level.
Something as simple as a ‘thank you for your efforts’ from a manager as they hand over the letter confirming the bonus payment can transform the perceived value. Personal delivery of a bonus award will be associated with the individual who gives it; the employee will be reminded of the good feeling they got from the reward whenever they see that person.
Beyond the bonus
Research by the Institute of Leadership & Management found that employees didn’t rate bonuses in their top five motivators. They were more interested in recognition, non-financial reward and support/feedback (ILM, 2013). This is supported by several academic studies which found workers value an unexpected cash reward for their efforts far above an award of the same value which they had already been told they would receive (Harvard Business School)(Harvard Business Review, 2013).
If you want to enhance how you motivate within your business and are looking for additional ways to help keep employees motivated throughout the year, have a look at some of our ideas:
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Challenge your managers to thank their employees. Can they personally recognise an employee for something they have done at least once a week? 70% of employees reported they are recognised only once a year, if at all! (Bersin, 2012)
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Give your managers a recognition fund. Make it easier for managers to recognise above & beyond performance that happens throughout the year. The key to a tangible gift is the thoughtfulness, not the amount spent on it. If managers take the time to notice what employees like, books, beauty, sports, then these small, relevant gifts will be highly valued. (Clarity)
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Give employees a route to recognise each other. Peer recognition can be even more effective and highly valued than that given by managers and the business, but do you facilitate it in your company? Look beyond simply ‘encouraging openness’ and think about what tools you can put in place to allow employees to do it quickly and easily.
