Why businesses need to reimagine the bonus structure
Last month it was revealed that four directors at the engineering firm Melrose had been awarded £40m in bonuses each, indicating that the UK’s bonus culture is showing no signs of slowing. Often seen as a motivational tool, many organisations believe that there is a direct correlation between large bonuses and company performance. However, there are much more effective and efficient ways to reward employees for good work.
Bonuses have a short shelf-life
The biggest problem with bonuses is that they have very little longevity when it comes to employee engagement. Generally awarded at the beginning of the year or business quarter, they tend to lift morale that month, however this very rarely lasts. If financial incentives are delivered in smaller sizes throughout the year to reward employees for great work, they yield much better results. Rewarding employees for their contributions throughout the year also improves employee engagement and drives positivity into the workplace.
In most cases, it’s also just the elite that are recognised, with only senior staff given significant financial rewards. Such approaches that target a select few may be entrenched in business, but they will ultimately fail to deliver long-term, wide-spread motivation, as the vast majority of staff will be completely untouched by the reward and recognition process.
The workplace is becoming more human
Organisations and the way people work are changing. Instead of big bonus cheques, employees increasingly crave more continuous all-year feedback and coaching to stay motivated. As businesses become more fast-paced and collaborative, employees want and need to receive feedback in real-time, so that they can do their jobs more effectively and efficiently.
A company’s culture can have a powerful impact on employee engagement as workers strive for a working environment that’s reflective of their personalities and aspirations.
It’s increasingly important for businesses to bind employees together with colleagues and give positive reinforcement. According to Maslow's hierarchy of needs, esteem or self-worth is a fundamental human need – money is an added bonus. Research shows that once you satisfy core human needs, people are freer to be more creative and innovative. As a result, the aggregate work of the employee base goes up, and they're more energised.
This shift in the way people work, combined with the available technologies to empower HR leaders and employees, means that there will be great changes to come. The so-called “pillars of human capital management”, annual performance reviews, performance ratings, and bonuses, will continue to crumble as forward-thinking organisations look past the old way of thinking and build new ways to connect the modern workforce.
Combining long-term bonuses with social recognition
A company’s culture can have a powerful impact on employee engagement as workers strive for a working environment that’s reflective of their personalities and aspirations. One way of building a strong company culture is through social recognition, where employees receive recognition not only from their managers but also their peers. Peer to peer social recognition blankets an organisation with goodwill and inspires employees to do their best work.
The biggest problem with bonuses is that they have very little longevity when it comes to employee engagement.
Recognition, when linked to a company’s core values, helps create and manage a happier, unified, and more meaningful work environment, with crowd-sourced recognition and rewards adding a human element to performance evaluations – something additional money in a pay check can’t do. While this trend is already underway to some extent, companies need to focus more on culture as a competitive differentiator as opposed to one-off tactics such as bonuses.
By breaking up bonuses into smaller, regular amounts, and combining with social recognition, businesses will experience first-hand how cultivating a rewarding company culture can be their most powerful tool in attracting and retaining talent.