Why is your bonus scheme the best?
November 30, 2011 6:56 AM   Subscribe

Bonus and Incentive Scheme filter: tell me about your fantastic bonus scheme (or just those elements of your bonus scheme that are fantastic). What makes it great, what makes it work?

We're revamping our bonus/incentive/salary review program and I want to know what great systems are out there or what parts of systems are great, from your point of view (whether you're the employee, employer, owner etc). What really gets you motivated and fired up?

(Feel free to tell me what you think really doesn't work as well.)
posted by HopStopDon'tShop to Work & Money (9 answers total) 2 users marked this as a favorite
Performance bonuses go to the whole company rather than just to the one individual or team who are apparently responsible for the good performance. This reduces "perverse incentives", where a subset of the company optimises their own corner of things at the expense of other parts of the business. It also does wonders for the morale of the IT department and whoever else is not on the coal face.

I worked somewhere that had a "share save" scheme: you could divert some of your pay to buying stock options, with the price locked in at the start of the scheme, and then at the end of 3 years the options vested. Many staff had rolling schemes - they would sign up each year, and then after three years they were getting a rolling yearly bonus. I guess this was intended to improve staff retention rates, which it did. There seemed to be a lot of miserable but long serving staff, who hated the place but wouldn't leave because some of their options were two years from vesting.
posted by emilyw at 7:12 AM on November 30, 2011

Make sure the employees are getting bonuses on things they have personal responsibility for -- a bonus on something that is mostly independent of the work they do doesn't make anyone happy.

As a general rule, employees don't like tiered bonuses where the tiers are too far apart -- if it's about number of X's done, make the jumps between bonus level 1 and 2 and 3 small. (At the school I work for, this is a question of student enrollment -- it's been tiers of "a better bonus each 10 students" which is a very large jump when you get nothing for the middle 5.
posted by jeather at 7:13 AM on November 30, 2011

We have a flexible benefits scheme at work. There are certain core benefits that everyone's entitled to, but then there's a pot of money for each staff member that can be spent on add-ons, such as extra holiday, paying more into your pension fund, dental insurance, child care vouchers.

This works well, because people can use their benefits to buy things which suit their lifestyles and they can change the way they spend their benefits as their circumstances change. So, for childless employees, buying extra holiday is good, but once the kids arrive, the money can be diverted for childcare vouchers instead of more days off.
posted by essexjan at 7:21 AM on November 30, 2011

Read the book Drive, by Daniel Pink. He talks about the science of human motivation, and also addresses how cash bonuses cause people to look to the very short term rather than the big picture.
posted by lulu68 at 8:30 AM on November 30, 2011

The best bonus schemes I've been a part of have involved things that the employee can control directly. Have the employees come up with metrics that best represent success (often a formula involving several metrics, such as productivity * quality * customer service) and then reward people IMMEDIATELY after good work is done.

A small amount in every paycheck, based on work done that week (if possible, of course) is much more motivating than a huge possible payout in the indefinite future based on unclear, company-wide criteria. Memail me for more details.
posted by 3491again at 8:58 AM on November 30, 2011 [2 favorites]

At our company, bonus money is doled out from one employee to another, management has no say in it and isn't part of the bonus pool (they have their own).

Basically, we have an internal site where employees can thank someone for achieving something/finishing a project/helping out someone else. Each achievement can be +1'd by anyone in the company. A percentage of profits are added to the monthly bonus pool, then divided among employees each month based on the number of +1's they've received.

What I like most about this system:
- Bonusses are monthly, so you're not waiting 12 months to be rewarded.
- It's transparent to the whole company. More than the money, everyone in the company knows you did something awesome.
- It's not based on abstract metrics
posted by dripdripdrop at 9:18 AM on November 30, 2011 [2 favorites]

One of the cool things I have seen in a bonus structure is allocating the budget in "Days of Pay". This way, the bonus is equally "meaningful" to everyone. See what the entire org gets paid in a day and divide the budget by that number... everyone gets that many "Days of Pay". The other advantage of this is that people all know exactly how it worked and don't get worked up if their neighbor Bob got a bigger bonus than they did.

There is also a firm out there (I think only in LA right now) called BetterWorks. They can aggregate offerings in such a way that people at even a very small company can enjoy paid perks that normally only large companies could negotiate.
posted by milqman at 12:47 PM on November 30, 2011

You definitely need to have a process for peer review. The worst morale I've ever seen in any workplace was where bonuses were given out solely by upper management without regard for peer interaction. People would literally rage because huge bonuses were given to employees who appeared productive, but who actually made life hell on their coworkers by demanding that others meet unrealistic deadlines, take on jobs that the person had slacked off on, and generally ruin everyone else's productivity. Management has no way of knowing who the toxic people are unless they ask, and if those people are rewarded, the other employees will hate you.
posted by decathecting at 9:26 AM on December 1, 2011

Response by poster: Thanks everyone - these are all useful tips and I'll definitely incorporate some of them.
posted by HopStopDon'tShop at 11:19 AM on December 2, 2011

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