Set up a bonus plan that works
The bonus method doesn’t work unless it’s handled properly. Follow these steps to award bonuses the right way.
Performance-based compensation can go a long way toward motivating employees to work hard and get good results. But the bonus method doesn’t work for managers unless it’s handled properly.
Follow these steps to award bonuses properly:
• Make it simple. If a bonus plan can’t be described quickly, it’s probably best to scrap it and start over on one that can be. Figuring out complex bonus plans can be a major headache and won’t entice people to work for them.
• Tie achievement to individual goals. These goals should be achievable and reflect the work put into them. Bonuses should be earned, but not set so high that they’re essentially impossible. Handing them out on an individual level makes sure that members of a team don’t get rewarded for doing less work than they were supposed to.
• Give rewards that matter. A vacation plan or a gift certificate may appear to be a nice gesture, but neither one gives employees freedom to choose their own reward. Sometimes, straight cash works best because it lets the employee decide what to do with it.
• Keep the plan stable. Going around and changing the bonus situation makes it less effective, because people are worried about its stability. Altering the bonus plan can also upset those who have gotten close to earning a reward only to see a new policy make all that work irrelevant.
• Publicize the winners. Showing other employees how they can achieve what their co-workers have accomplished is a great motivator. Employees can also see clearly how the bonus was rightfully earned and deserved, avoiding disagreements and discontentment surrounding bonuses.
—Adapted from BNet