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Apr 17, 201301:58 PMOpen for Business

with Jody Glynn Patrick

Can bonuses actually be demotivating?

(page 2 of 2)

During the bonus period (quarterly, yearly?) communicate how close the entire team (company, division?) is to surpassing the dollar amount that establishes the pool; people can get real cooperative to hit a joint goal. (Free advice: Cap that pool to allow for reinvestment without demotivating staff, and explain to staff the concept of return on investment for ownership – it doesn’t necessarily come out of net profit, but rather could/should be a budgeted expense).

Still, there is a downside to this program as well. When everyone feels vested in payouts, management has to bite the bullet when it really becomes necessary to drop prices due to market competition. Those margins can also slip pretty fast when you roll out a new product that takes a few months longer than expected to gain traction, and people incentivized by shorter-term financial goals may unconsciously sabotage company growth and reinvestment. Equipment upkeep becomes an issue, and everyone can think of a way to save money … in someone else’s department. That’s why the budget has to be defined and communicated first, which should take into account those strategic plans, which follow the performance reviews, which …

And that’s why executive management shudders when, after all that figuring, explaining, and goal-setting, key employees ask for more money to stay if they get another job offer at a higher rate. But that’s another column for another day … and all a part of what it takes to stay open for business.

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