The Bonus Trap by Bill Collier

The Bonus Trap
by Bill Collier

You did it again this year, didn’t 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 didn’t take the time to explain to your employees things like:

the company’s 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.

It’s 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, it’s the holiday season. Anyone would rather be Santa than the Grinch. Plus, because you’ve handed out bonuses for years, it’s become an expectation.

In fact, it’s turned into an entitlement.

Before you go thinking that I’m Scrooge – 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 they’re great. But if you’re using bonuses only to reward your employees for their efforts, you’re 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, I’m afraid to not give year-end bonuses, so I’ll give them anyway. I won’t share our results with the employees because if they know we’re not doing well, they may leave.

Level 2: We had a good year, but I don’t want the employees to know how good. I give bonuses only because I’d feel guilty if I didn’t, and because the employees expect them. I won’t 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 employees’ efforts. So, I’ll give bonuses accompanied by my genuine thanks for their hard work. But, I won’t talk about our results because I doubt the employees will care or understand.

Level 4: We had a good year, largely due to my employees’ efforts. So, I’ll give bonuses accompanied by my genuine thanks for their hard work. I’ll 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 aren’t 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 don’t care about or understand the numbers. So, why bother to share them?

You may be right – they don’t care or understand… yet. That’s because it’s up to you to help them care and understand. It benefits you to do so.

Fixing both the “don’t care” and the “don’t understand” problems is easy and straightforward. You want your employees to care about the company’s 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 can’t 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 – and bonuses - are funded by the company’s growth and financial health.

Done correctly, the light bulbs will start to come on for your employees. They’ll start to understand, and they’ll start to care.

Do you see how you can use bonuses to good advantage by tying them to the company’s success? It’s important to appreciate and thank your employees, but don’t 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 “How to Succeed as a Small Business Owner … and Still Have a Life.” His website is www.collierbiz.com, and his email is bill@collierbiz.com