Separating Bonuses and Year-End Gifts
'Tis the season to remember employees, but how? For years we have been encouraging companies to separate performance bonuses from year-end gifts, often called bonuses. In this season we want to take a step back and think strategically. What is it we want to reward? What is the best way to give that? Are you thanking someone, sustaining a tradition , improving morale, or incenting results? What assumptions are you making about the bonus? What assumptions are your employees making about it?
Hewitt Associates notes that 65% of all companies will not be giving a holiday bonus this year. Those that do will limit it to cash rewards less than $300, minimal gift certificates, and the food, all tallying a total of 2% of their payrolls. However, bonus plans that pay for performance - or the incentive model - will average about 9%.
What we encourage leaders to consider is to separate the two by several months. If you want to acknowledge the loyalty, tenacity, and contribution of people that have impacted your company, by all means use the holidays to do so with a company celebration and some standard 'gift' of certificates, cash, and food. In a time when employee morale is at an all-time low, this would be strongly recommended.
However, if you want to incent productivity, profitability, cost containment, or any number of milestones that appear on the strategic plan and department goals, use a bonus plan that is distributed some other time of the year and is not confused with appreciation and holiday cheer.
Leaders need to both appreciate and inspire. When the two cross lines at the holidays the bonuses can feel more like an entitlement than an earned reward, and the absence of anything can feel like a slight for our most valued customer; our employees.
It is time to think outside of the box and move away from assumptions. Time to ask yourself what you want to acknowledge and recognize, and what you want to inspire Then the true challenge comes in the how.
Many of you remember the great O'Henry story of The Gift of the Magi. In this story both people sacrificed their greatest asset to give to their partner, only to find that the partner had sacrificed their greatest asset and could not use the gift.
The holidays are meant to be a time of giving, and as leaders we can respond to that with wisdom. We can't give to the point that we are putting the company in jeopardy if it has been a difficult year. But if the company has succeeded, it has been through the labors of our greatest gifts - our internal customers.
Let's not confuse giving with a time of earned rewards. If we give, let it be in a way that illustrates giving, not earned rewards. Let's give to illustrate our gratitude and our respect, and save the bonuses for another day.