By December 12, 2011blog
Last week I had couple conversations about bonus structures. I’ve experimented with a lot of things over the years and here’s what I’ve come to believe. I think of bonuses in two categories:
1. Incentive
2. Appreciation
I think they have more impact when kept separate. Let me explain…
Incentive Bonuses
I believe we all have an instinct to want to play games. I call it “the gaming gene”, and we all tend to get excited to have games to play, keep score, and win. I also believe this instinct is the basis for why some, albeit a small % of people, are truly motivated by money. It’s a score to keep track of their progress in the game of life.
The incentive bonus is really more about a “prize” that individuals and teams can look forward to as a result of hitting their goals or playing the game well. I’ve seen more motivation come from offering $100 worth of movie tickets than receiving $100 cash. So the “prize” or bonus does not need to be a cash, in fact it may be more effective if it isn’t. But, what’s really important and motivating is setting up the “game” well. For example at RegOnline, we would have quarterly departmental goals that were focused on moving the needle above and beyond where we were. Sales may be looking to increase conversion on their demo’s by 10%, or development would be pushing to get an extra project released, or marketing would be focused on getting a few more top search engine rankings for a couple more keywords. Goals seem to work best when they:
1. Move the needle/important to where the company wants to head
2. Achievable – aim low, make progress
3. Short term – no longer than 3 months
4. Team oriented – the team agrees and is excited
5. Fun/motivating bonuses (i.e. everyone gets massages, we all go to Mexico, Fridays off for the next quarter)
Appreciation Bonuses
I believe that unexpected bonuses go a LONG way with sending a caring message. Much more so than giving regular expected bonuses that are really just a way to true-up below-market pay. Pay market rate and then do the UNEXPECTED. I try to make them random both in timing (3-4 times a year) and in format (ipads, cash, airline miles, spa treatments, trips to mexico, etc.). I love how excited my co-workers are when they receive a bonus/gift they weren’t expecting. It makes it SO much more fun for everyone.
I’ve never been a huge fan of holiday bonuses because they are expected. But, I also know that it helps people who aren’t as good at saving for the holiday gifts. So, I tend to give cash/gift cards in the 4th quarter to help.
I also believe in splitting my bonus budget EQUALLY amongst full-time employees. Doesn’t matter if someone makes double the salary of another. I believe differences in salary has little to do with ability to be of value to the company. I’ve seen $35,000 support team members win customers for life with their care and responsiveness and $80,000 developers cause customers to head for the door because of poorly written code. I also like sending a signal to EVERYONE in the company that everyone CAN (and does) make a big difference regardless of pay.
Motivate and Appreciate SEPARATELY.
Engender team work.
Have fun with it (with prizes instead of cash)

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