The trouble with bonuses

๐—Ÿ๐—ฒ๐˜โ€™๐˜€ ๐˜๐—ฎ๐—น๐—ธ ๐—ฎ๐—ฏ๐—ผ๐˜‚๐˜ ๐—ฏ๐—ผ๐—ป๐˜‚๐˜€๐—ฒ๐˜€. ๐Ÿ’ฐ

(Aside: in the UK we have many slang words for moneyโ€ฆ wonga, wedge, bread, bangers and mash, readies, shrapnel, wad, filthy lucre)

Now, during this cost-of-living crisis, it’s only natural that many of us would like more money in our pocketsโ€ฆ  especially when the holes in our pockets seem to be getting bigger and BIGGER.

With that in mind, many leaders are probably considering how they can get more money in their team members’ pockets without stoking the fires of inflation. ๐Ÿ’ฐโžก๏ธ๐Ÿ“ˆ๐Ÿ”ฅ

If this is youโ€ฆ.

You need to knowโ€ฆ that not all methods of remuneration are the same.

Bonuses and wages have different effects on peopleโ€™s motivation and decision making.

Now, you might be thinkingโ€ฆ. โ€œAndrew, why should I care?โ€

Well, if you want team members who areโ€ฆ

โ€”> engaged

โ€”> persistent (keep going with challenging tasks and projects)

โ€”> taking โ€˜healthyโ€™ decisions

โ€ฆ you must care.

๐–๐ก๐š๐ญ ๐š๐ซ๐ž โ€˜๐ก๐ž๐š๐ฅ๐ญ๐ก๐ฒโ€™ ๐๐ž๐œ๐ข๐ฌ๐ข๐จ๐ง๐ฌ? 

Healthy decisions are those which support the long-term sustainability and flourishing of the business, your customer, the team, and the individual.

Unhealthy decisions can be made by anyone on your team. From the highest (Senior Execs) to the lowest (trainee).

Examples of unhealthy decisionsโ€ฆ

๐ŸŽˆ Pumping the stock price by shifting sales to a share-friendly quarter

๐Ÿ›‘ Holding back on investments that may negatively affect short-term value of business, but hugely increase long-term value of the business (link below)

๐Ÿ’ฌ Misselling a product to a customer

๐Ÿฉน Using temporary/dodgy solutions to finish tasks and projects faster

๐Ÿ˜‡๐Ÿ‘น Treating one customer well, and treating another customer poorly

๐—ช๐—ต๐˜† ๐—ฑ๐—ผ ๐—ฝ๐—ฒ๐—ผ๐—ฝ๐—น๐—ฒ ๐—บ๐—ฎ๐—ธ๐—ฒ ๐˜๐—ต๐—ฒ๐˜€๐—ฒ ๐˜€๐—ผ-๐—ฐ๐—ฎ๐—น๐—น๐—ฒ๐—ฑ ๐˜‚๐—ป๐—ต๐—ฒ๐—ฎ๐—น๐˜๐—ต๐˜† ๐—ฑ๐—ฒ๐—ฐ๐—ถ๐˜€๐—ถ๐—ผ๐—ป๐˜€?

Well, sometimes, people donโ€™t know any better.

However, othertimes, they occur because people have been offered the wrong kind of motivationโ€ฆ BONUSES

You see, bonuses can lead to people making unhealthy decisionsโ€ฆ. Decisions that are focused on achieving the bonus, rather than best supporting the long-term health of the business, customers, team, and individual.

Now, this isnโ€™t true in all cases. But researchers have found that itโ€™s true in many. (Comment below if you want the link to researchโ€ฆ Iโ€™ll dig it out for you.)

BONUSES can lead to poor choices (like pretending that a project is okay) and errant behaviours (like when individuals trample-on-others so they achieve their bonus) .

๐—›๐—ผ๐˜„๐—ฒ๐˜ƒ๐—ฒ๐—ฟ, ๐˜๐—ต๐—ถ๐—ป๐—ด๐˜€ ๐—ด๐—ฒ๐˜ ๐˜„๐—ผ๐—ฟ๐˜€๐—ฒโ€ฆ. 

BONUSES are an external form of motivation, and therefore a controlling form of motivation. 

And people who are externally motivated often lack long-term persistence and engagement with tasks (proven in multiple tests).

So, bonuses can also be tremendously counter-productiveโ€ฆ greatly reducing the motivation of team members.

๐—ช๐—ต๐—ฎ๐˜ ๐˜€๐—ต๐—ผ๐˜‚๐—น๐—ฑ ๐—น๐—ฒ๐—ฎ๐—ฑ๐—ฒ๐—ฟ๐˜€ ๐—ฑ๐—ผ ๐—ถ๐—ป๐˜€๐˜๐—ฒ๐—ฎ๐—ฑ?

โœ… Increase wages rather than pay bonuses โ€” wages are less controlling, and tend not to lead to unhealthy decisions.

โœ…If you must use bonusesโ€ฆ. Focus these on long-term goals and performance. Consider other criteria than โ€˜sales wonโ€™ or โ€˜tasks completedโ€™. For instance, โ€˜customer feedbackโ€™ or โ€˜contribution to the teamโ€™.

โœ…Connect people with the values and big-mission (e..g, free books for all kids) that drives the business

Whatโ€™s worked best in your business?

I would love to know. Please connect with me on LinkedIn and let me know.

Also on InterstellarWay.Life

16 signs of an underperforming business team

If youโ€™ve already got a perfect business team, thereโ€™s little point investing (money, time, energy) in training your team.

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