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Why Financial Bonuses don’t work

In today’s world many organisations actively try and design incentive schemes to drive improved results. The premise is that if you motivate employees towards meeting set goals, you can create a performance driven culture that rewards the exceptional performers, but in many instances this strategy falls on its head. Want to know why?
Because bonuses are not linked to company values, and often drive the wrong kind of behaviour and thinking.

Take this scenario, you have a Sales Manager – Jason Barret who is incentivised based on meeting a set sales budget. Normally with a gate around net profit or margin. His total department budget is normally taken into consideration and this is where the link to net profit is bound. So, if Jason can cut costs around such things as labour, in order to make the numbers work, he will make his bonus. And therein lies the problem. Bonus structures typically promote a “Me” before “We” culture. We actually reward Executives based on the numbers but the hidden price of doing this, is that these Executives are willing to sacrifice the people in order to make the numbers work.
Don’t get me wrong as a HR practitioner I have helped design 100’s of these schemes, as I too thought this was the best way to drive increased performance, but let me tell you what I have learned over the years:

1. Incentives drive people’s focus towards them which in turn creates a negative culture
2. Incentives erode at team collaboration (Me vs We)
3. Incentives provide opportunities for people to fudge the numbers in order to make the $ work for them = bad behaviour
4. Incentives take people’s focus away from your clients and exceptional customer service
5. Incentives based on numbers gives Executives the platform to put profits before people
6. Incentives create dog eat dog environments where people are willing to throw everyone under the bus in order for them to gain

So, what is the solution? At the end of the day, people want positive recognition of efforts not just outcomes. Rewards programs based around values and reinforcing these will create a positive culture where people want to work together to see your organisation succeed.

If you need help designing a values-based rewards program get in touch today.

Written by Head Guru Emily Jaksch.

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