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The Bonus Trap
by Bill Collier

You did it again this year, didnít you?

You gave your employees a nice year-end holiday bonus that was totally unrelated to the performance of your business.

Or, maybe you gave bonuses because had a good year, but you didnít take the time to explain to your employees things like:

  • the companyís financial results.

  • how each employee impacted those results.

  • what they need to do more of in the new year to get an even bigger future bonus.

 Itís a trap, this year-end bonus thing. Most of us business owners fall into it at some point.

After all, you want your employees to be happy. You want them to like you and the company. Heck, itís the holiday season. Anyone would rather be Santa than the Grinch. Plus, because youíve handed out bonuses for years, itís become an expectation.

In fact, itís turned into an entitlement.

Before you go thinking that Iím Scrooge Ė let me explain. (Actually, old Ebenezer was a good guy - after the three ghosts gave him an extreme make-over.) I love giving bonuses. I think theyíre great. But if youíre using bonuses only to reward your employees for their efforts, youíre not getting enough bang for your buck. A little education is also needed.

Which of the following bonus-giving levels are you on?

Level 1: We had a rough year. Cash is tight. But, Iím afraid to not give year-end bonuses, so Iíll give them anyway. I wonít share our results with the employees because if they know weíre not doing well, they may leave.

Level 2: We had a good year, but I donít want the employees to know how good. I give bonuses only because Iíd feel guilty if I didnít, and because the employees expect them. I wonít share our results because the employees would ask for raises if they knew how well we did this year.

Level 3: We had a good year, largely due to my employeesí efforts. So, Iíll give bonuses accompanied by my genuine thanks for their hard work. But, I wonít talk about our results because I doubt the employees will care or understand.

Level 4: We had a good year, largely due to my employeesí efforts. So, Iíll give bonuses accompanied by my genuine thanks for their hard work. Iíll also explain our results and let everyone know how they can help ensure an even better year ahead.

If you are on level 1 or 2, get a clue. Your employees arenít dumb. They know whether your business is thriving or circling the drain. The signs are everywhere.

The business owners at level 3 believe their employees donít care about or understand the numbers. So, why bother to share them?

You may be right Ė they donít care or understandÖ yet. Thatís because itís up to you to help them care and understand. It benefits you to do so.

Fixing both the ďdonít careĒ and the ďdonít understandĒ problems is easy and straightforward. You want your employees to care about the companyís success, so give them good reason to care. This is where the education comes into play.

Get everyone together for a meeting. Explain to your employees that your expenses are going up (I assume they are.) Then explain that you canít simply raise your prices as you see fit, because many of your customers would go away. (I assume they would.)

Continue the discussion by talking about benefits and health insurance rates. Discuss the ongoing need for new computers, vehicles, tools, software, furniture, and other business necessities. If you want to be really candid, talk about raises. All these things Ė and bonuses - are funded by the companyís growth and financial health.

Done correctly, the light bulbs will start to come on for your employees. Theyíll start to understand, and theyíll start to care.

Do you see how you can use bonuses to good advantage by tying them to the companyís success? Itís important to appreciate and thank your employees, but donít stop there. Help your employees understand how it benefits them if the company makes money. Everyone wins.

Get out of the bonus trap.


Bill Collier is a St. Louis-based business consultant and speaker. He is the author of the book ďHow to Succeed as a Small Business Owner Ö and Still Have a Life.Ē His website is, and his email is


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