Don't Be Santa!

December 10, 2010

By: John Zink

When it comes to bonuses, it just doesn’t pay to be Santa. Why? It is one of the few ways you can ruin someone’s day by handing them a check!

Examine this scenario. At the end of the year, the boss hands out checks for $500 to every person on staff. The next year the boss hands out checks for $500. And the next.

Then one year, the boss hands out checks for $250. Don’t think for a second that the employees are still smiling after opening their envelope. The first thought through the head of the employee is “Where’s the other $250?”

For most of the bonus recipients, their day has been ruined because they didn’t get something they thought they were entitled to. It doesn’t matter that this was a tough year and the company didn’t as make much money. It doesn’t matter that even with cutting the amount this year that you still paid out thousands.

The owner’s actions in the previous years built an expectation of $500. That has become the baseline of the employees’ expectations. Anything below that amount is also below their expectations and causes resentment.

Handing out bonuses not Linked to any kind of incentive program is like playing Santa handing out presents. Instead of being Santa, be a good boss who ties rewards those who contribute the company’s success. How? With a good incentive plan Linked to individual performance.

Building a good incentive plan Linked to performance is harder than you might think. You must develop ways to objectively measure each employee’s performance and a fair way to compare staff in different positions against each other. You must find a plan that doesn’t allow people to feel like there is any favoritism or allow some people to cheat the system.

The best plans will also give employees a chance to reward coworkers they think deserve to be recognized. This might sound like a lot of work, but the benefits can very quickly justify the effort. Leave the Santa work to the guy with the sleigh.

You can catch a discussion on building an effective incentive plan at the Foundation’s Essentials of Project Management course. 

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