This month, most of us are practicing the sacred ritual of giving and receiving a bonus. By now, this annual tradition seems too well established to question its origins or effectiveness. We continue to believe that bonuses will keep our employees motivated and our companies thriving. And we repeat the cycle year after year, creating a culture with a single driving force. But, is this Culture driving the performance we need at work?
How effective are bonuses, really? Do they drive collaboration, innovation, teamwork and sustained high performance?
Let's face it...we do have a bonus fetishism. Here's what works and what doesn't, so you can decide for yourself.
Perfect for rewarding simple tasks: Do your people have to lay bricks? Bonuses are great at speeding accomplishment and accuracy of simple, repetitive tasks
Provide temporary compliance: Going through a messy reorganisation and need to lower resilience? Bonuses tend to work well as a temporary compliance measure.
In the absence of any tangible work purpose, the bonus can stand as a motivator.
Let’s face it – bonuses are easy. They are easy to count, easy to distribute, they create and sustain a desired hierarchy in the workplace.
Bonuses change behaviours, not beliefs: Our passionate belief in the power of bonuses is actually inspired by rats. An American psychologist experimented on rats, rewarding them for particular behaviours. Rats learnt to perform to receive treats. As rats learn, so do people. In the human world, however, learning a behaviour that gets you a bonus, does not mean you will internalise the values/mission/vision of your company. Your people might stay late and attend all the training sessions to get a bonus, not to create a better software for your customers.
In fact, paying for performance weakens people’s bond with what they do. Bonus becomes the end of all efforts, pushing the satisfaction with fulfilling the purpose away from people’s attention. This fixation on hitting a narrow, numeric goal is proved to dumb creativity and innovation.
Obstruct focus on sustainability, crowd out manager’s productive time: To stop short-term decision-making Investment Management axed bonuses. So did RedGate Software. And they were able to redirect their manager’s time from managing compensation system to producing a great quality product. They switched their culture from bonus- to purpose-focused, and business value started adding up.Break collaboration: Bonuses encourage competition. Often, they also measure everyone under a single measuring stick – for example, how much do people sell. Thus, they miss acknowledging different roles that people have at their company and distinct contributions they make. These factors create a toxic culture of fierce competition, obstructing any possibility of collaboration.
Even if we agree that over-reliance on bonuses is damaging, leaving a bonus-driven culture might seem impossible in today’s world. The good news is – it is not impossible. All you need is a slow but relentless change in the conversations about purpose.
Now is a perfect time to start changing it. Why, if it wasn't for the bonus, would your people come to work for?