February 19, 2018
Culture-Scaler™ #12 Games People Play: “Bonus Roulette”
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When companies finalize bonus payouts at financial year end, assuming no fiscal impediments, they sometimes delay payouts from 1 to 3 months engaging in a sort of "bonus roulette" with employees from a culture perspective. Such delays heighten employee exposure – especially in organizations which have a "must be present to win" policy. Organizational drag is created with employees who have already made up their mind to leave the company hang around until the bonus payout is made.
Bonus roulette also heightens expectations to receive the full award if no other information has been forthcoming. Management, however, is often in their back room spinning the wheel of winners and losers to determine full or partial rewards. When employee expectations are not met by the actual award, organizational drag turns into cultural hostility.
I've coached dozens of managers and executives who are keenly aware of these phenomena, but feel powerless to change. They are often not well-versed in the proportions of base and variable cash compensation, are nebulous about goal setting and some cases don't believe it is in their job description to decide employee pay. So they ultimately gamble with employee retention.
But here are three things leaders can do to immediately end bonus roulette and create a healthier culture:
Don't wait for year-end financials to discuss employee and company performance. Most employees have a handle on what they need to do to make their bonus, but strain to comprehend the company performance side of the equation. It can affect payouts by as much as 50%, so it is crucial for an employee to be able to process and cope with a reduction from target even if they fully delivered on their goals.
It never fails that there is one manager who wants to "send a message" to an underperforming employee by drastically reducing their bonus amount. This "message" is one the manager did not have the honesty to confront in other performance processes before now. If the blindsided employee absorbs this (and they often do), you've set a new cultural low for expectations and rewarding performance.
Goals are perishable! They go bad if not tended to. Employees should self-review goal progress at least twice a year. It gives a safe space to update with current business reality and identify limitations or gaps. Most HR systems now provide on-the-fly goal update capability and automated prompting. Up-to-date goals allow in-progress recognition of milestone achievements and enable the business to plan and execute with increased precision.
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