Reality Check: Not Everyone Deserves a Bonus If you reward an employee's subpar performance, you're only hurting your business. Here are four tips on how to handle the bonus process the right way.
By Lindsay Broder Edited by Dan Bova
Opinions expressed by Entrepreneur contributors are their own.
The everyone-gets-a-trophy syndrome has officially gone too far. The millennial generation was raised on this incentive-killing practice because parents and educators determined it was "fair" that every kid be rewarded just for showing up. And now that attitude has made its way into corporate America in the form of bonuses for all, and it smells like something out of a locker room three days after a soccer game played in the mud.
According to a study released earlier this year by Towers Watson, nearly a quarter of employers surveyed admitted to paying bonuses even to employees who "fail to meet expectations." To some, this is considered fair. Their argument might be that if you show up every day, you're reliable, and therefore deserve to be rewarded. Truth is, not everyone can be a star, right? My question to all employers, executives and managers is, how long do you think it will take for the damage you're causing by rewarding subpar performance to set in and destroy your business?
With the end of 2013 only a few weeks away, many business leaders are starting their annual compensation considerations and are working out the details about bonuses and raises. And many feel that they can't give some rewards and leave out others simply because they aren't star performers. The truth is, giving those employees who are not deserving is more about you not wanting to feel uncomfortable about it than it is about the employee who is barely contributing to your enterprise.
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From countless conversations I've had with employers, high-level managers and corporate executives, I can tell you that one of the biggest and common frustrations among leadership is a lack of initiative and innovation among their staffers. So then, what does paying bonuses to underperformers do for your team or organization besides make you a nice guy (or gal)? Haven't you heard? Nice guys finish last. By paying bonuses to low performing employees, you are sending a message to the rest of your staff that they don't need to work hard because they can do the bare minimum and still get rewarded. And let's face it -- most enterprises don't have the resources to throw money around haphazardly
So assuming you decide to stop the madness before it destroys your business, you might be wondering how you're going to break the news to those who are not going to be receiving a bonus. Consider these four steps to making your life easier and to ensuring this process goes smoothly:
Be honest. Schedule a 15-minute sit down with your employees and be upfront that they won't be getting a bonus. The worst thing for workers is to plan to get compensation that never materializes. Remind them that bonuses are exactly that – bonuses that should only be given when business is good, to workers who go the extra mile. There is nothing wrong with letting employees know where they stand and then create plans with them for improving performance.
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Restructure your bonus pool. Who said bonuses and raises have to be disseminated once a year? If you've been rewarding everyone for a while, now's your chance to turn that around and make it a positive experience. Consider reserving a small pot to distribute throughout the year for a job well done. Just because you aren't giving raises or bonuses to everyone doesn't mean you can't at some point. Consider creating an incentive pool and give all employees guidelines for what it takes to get rewarded. Make sure they know that just because they weren't rewarded during bonus season, doesn't mean they can't be rewarded for a job well done though out the year.
Set measurable expectations. Ideally you would want to either directly or indirectly (through their direct managers) set expectations with each employee. You want to let the employees know what it will take to make you reward them. And, to the best of your ability, make sure these results are measurable, leaving little or no room for subjective evaluation. This lets even employees who might think you don't like them feel that their work will be rewarded.
Schedule check-ins or evaluations throughout the year. Forget annual reviews. These meetings should be held on a regular basis, especially with your current underperformers. You have to decide what works for you and your organization, and based on how long you think it will take for employees to make significant progress. Perhaps once a month or once a quarter is appropriate. Keep track of each employee's progress and don't forget to reward from your incentive pool. Some leaders make their incentive programs on a progression basis. They will layout milestones they expect employees to meet and then reward them in phases based on hitting those marks.
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