In the companies I have worked before the bonus systems sucked most of the time because they were creating an ill environment of envy and harmed the company culture. The main problem was that they were designed after the traditional “if … then” reward system.
But since Daniel Pinks great book “Drive” we know that these rewards don’t work, decrease performance and can destroy the intrinsic motivation. Watch this video if you don’t know what I am talking about:
Thats not what we want! So, what shall we do?
Giving no bonus? That wouldn’t be fair because the main reason the company is making profit are the employees, aren’t they. So it should be shared.
To create a smart reward system you can use these Six Rules of Rewards suggested by Management 3.0:
1. Don’t promise rewards in advance
Make it a surprise. That way you prevent that people are working only for the bonus.
2. Keep the rewards small
If you can`t prevent that the reward is anticipated then you should keep them small in order to keep the negative effects small.
3. Reward continuously, not just once
It should become a regular habit and not only once a year because the achievements of the workers happens every day.
4. Reward publicly, not privately
If the rewards are transparent and fair then envy is unlikely to happen.
5. Reward behaviors, not only outcomes
To create a safe-to-fail environment where people can run experiments we need to reward also the intentions of the people.
6. Reward peers, not just subordinates
The workers know much better who deserves which reward because they are working together every day. And giving everyone in the organization a chance to reward each other will create a helping and appreciation culture.
Keeping these rules in mind for your reward system will positively influence your company culture.
How about your bonus system? Which rules are covered?