Reach for Excellence

Do You Give Bonuses? Why & How to Do It

By Mark Wright, OD, FCOVD,

and Carole Burns, OD, FCOVD

Dec. 13, 2017

If you don’t give end-of-year bonuses to your employees you’re in good company. Some 53 percent of employees said they do not anticipate getting a bonus—even though 84 percent of the employers said they plan on giving year-end bonuses, according to Pop-Up Poll results from Women in Optometry. Click HERE to read the full results.

End-of-year bonuses typically fall into one of two categories: discretionary or performance. Discretionary bonuses are often given to make up for lower pay throughout the rest of the year, to make employees feel better, or to make the employers feel better. Performance bonuses fall into two categories: (1) individual performance and (2) group performance. Individual performance is based on how well the individual person performed based on goals set for a time period (e.g., a year). Group goals are based on how well the entire business did over a time period.

Why do we believe that bonuses work?
Our belief in bonuses working to motivate our staff and doctors came from the school of psychology called behaviorism pioneered by John Watson and B.F. Skinner. Watson presented that all human behavior is the result of external conditioning – that individuals subjected to stimuli will associate the stimuli with the associated responses creating normalized behaviors. Skinner added the concepts of “classical conditioning” and “operant conditioning” – that all human behavior is a response to a reward or punishment. (Classical conditioning involves making an association between an involuntary response and a stimulus, while operant conditioning is about making an association between a voluntary behavior and a consequence. )

From Watson and Skinner’s perspective, bonuses are external stimuli which encourage increased productivity which, when repeated, create normalized behaviors through operant conditioning.

But do bonuses work?
Dan Pink in his YouTube presentationiii, “The surprising truth about what motivates us,” describes when bonuses work and when they do not. He even presents the idea that bonuses – when not properly used – can have a negative impact on work performance. He tells us to use bonuses for repetitive behaviors, but not for creative endeavors.

There are three areas where bonuses can go wrong: (1) bonuses can lead to workers taking short cuts and acting unethically, (2) bonuses can reduce intrinsic motivation, and (3) bonuses can lead to envy between employees, which may lead to bad attitudes and even high employee turnover. Let’s explore each of these.

Bonuses can cause short cuts and unethical behavior
General Mills had a problem with insect parts in their Green Giant frozen peas. General Mills decided to give bonuses to employees who found insect parts in their Green Giant frozen peas. This worked until workers began bringing insect parts from home to “find” in the frozen peas. This is clearly unethical behavior, but was justified by the workers because they wanted the bonus.

Bonuses can reduce intrinsic motivation
Intrinsic motivation is doing something because you want to do it. Extrinsic motivation is doing something because someone else is persuading you to do it. Most of us perform best at tasks we want to do, which is driven by intrinsic motivation. Herzberg’s Two Factor Theory presented the idea that extrinsic factors have a limited capacity to motivate and a high capacity to demotivate you (left side of the graph below) while intrinsic factors have a high capacity to positively motive you (right side of the graph below)iv.


Source: https://peakon.com/guides/lesson/intrinsic-motivation-and-its-influence-on-performance-creativity-and-learning/

We learn from Herzberg that job satisfaction and job dissatisfaction are not opposites of each other. The opposite of Satisfaction is No Satisfaction, and the opposite of Dissatisfaction is No Dissatisfaction. Fixing the problem of dissatisfaction in your workplace does not create satisfaction, it only creates no dissatisfaction. If you create a healthy work environment without any of the satisfaction factors shown in the chart above, your staff will not be satisfied.

Bonuses can cause envy
Bonuses can increase pay disparity, which can cause envy between employees, especially if favoritism is perceived. Your reward structure must have a transparent framework that everyone understands. Without this transparency, the perception of favoritism can negatively impact your culture and eventually your bottom line. At its extreme, favoritism can lead to lawsuits. Favoritism, and the perception of favoritism, is never good.

So, what is our action plan for today?
If you are giving a discretionary bonus, then give it with a happy heart.

If you are giving a performance bonus, then review your incentive plan to make sure it has the following components:
1) Use the Dan Pink information to make sure your incentive program is properly structured.

2) Make sure your bonus system is not …
a) … leading your staff to take short cuts and act unethically.
b) … reducing intrinsic motivation.
c) … leading to envy between employees.

3) Make sure you actively include Herzberg’s satisfaction factors in your workplace.

 

References
i. https://peakon.com/guides/lesson/do-bonuses-work-the-pros-and-cons-of-employee-incentive-programmes/
ii. https://www.verywell.com/classical-vs-operant-conditioning-2794861
iii. https://www.youtube.com/watch?v=u6XAPnuFjJc
iv. https://peakon.com/guides/lesson/intrinsic-motivation-and-its-influence-on-performance-creativity-and-learning/
v. https://www.mindtools.com/pages/article/herzberg-motivators-hygiene-factors.htm
vi. http://fortune.com/2015/08/04/favoritism-careers-leadership/

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