Employee Bonus Strategy
Shop owners discuss whether, when and how to award employees a bonus after an outstanding month for the company. September 4, 2005
I have a shop that manufactures custom grade cabinets, laminated plastic, and solid surface countertops. I employee eight, two of which are part time.
Last month we had our largest sales months ever. The guys have been working very hard. I would like to give them a bonus, but I know if I do, they will except it in the months to follow. I do not mind doing so, but I need some ideas on a profit or sales quota bonus plan.
(Business and Management Forum)
It's really great to hear that your company has taken off and it is encouraging that you want to spread the cheer.
A week's salary would be most impressive and after your employees get up off the floor, they will also realize who they work for. I have seen other companies try to set up bonuses based on performance, but the results were not what you would expect. The extra pay for performance set up a competition that would get out of hand with work done in haste and the workers abusing other workers to gain the upper hand. In a safety-conscience operation, there can be some bad results.
Maybe just a surprise of occasional bonuses like you are thinking would be all that is needed.
A simple "we had a great month and I'd like to show you my appreciation" is all you need to do. My experience has been that bonuses given in that sort of surprise method are appreciated and do not lead to expectations of more of the same.
I like to include an occasional "thank you" to my guys in the form of $100 every once in a while. Green cash in their paycheck envelope. Personally, I think a full week's pay is too much. The hundo you can give more often. Any way you go, money is a great motivator and morale booster. Try it and you won't be disappointed. Great return on investment.
Sounds like you feel a little guilty for making too much money :) It is always a good idea to reward good behavior. We do the cash in the pay envelope, once in awhile an extra $50.00, and we them go early when the job is done and all's well. Getting off at 12 on a Friday but still getting a full check gets noticed. But don't do the same thing all the time or on a regular basis. Otherwise, it will be expected by some employees. And if that's the case... you might as well give them a raise. Congrats on your success.
I learned about a management/psychological theory in college, but I can't remember its name or reference. It's something along the lines of "schedule of variable reinforcement." This motivational theory suggests that a randomly occurring reward is a stronger motivator than a constant reward (or punishment). In other words, the scientists agree that it will motivate your employees more if you spontaneously give out bonuses, hold picnics, give prizes, etc., when the situation merits, than if you set an expectation of a quid pro quo. Once you have a policy-based bonus system, they view it as part of their compensation package. Now you are open to comparisons to other employer's compensation schemes and the motivational effect is lessened or eliminated. In short, you've done a good thing and it makes both you and your employees feel good. For the situation you described, that's what it is all about!
I worked for eight years at a custom cabinet shop where the owner looked at the books twice a year, July and December, and gave out a bonus at those times based on profitability. Everyone who was there for the full time between bonuses got a full share. Others got a pro-rated share. Made me feel good and was appreciated by all.
I think you are on the right track with rewarding your workers, but sales are not the same as production. I would reward the salespeople for sales, reward the workers for efficient, safe, and profitable production.
I gave a bonus on every job that I made money on to the whole crew. If I was to go back in time, I would be the cheapest boss in town. I gave a lot of my money to these guys and they did not appreciate it. All they wanted was another bonus. I still gave and gave until I lost my lead guy to his own business. I could not pay him enough money to stay. I tried and it was not healthy for my business. Give them insurance or something instead.
I agree with the suggestion "we had a good month (quarter) and I want to spread the wealth." I've done that in the past and it's worked much better than any sort of motivational bonus. In my shop, scheduled bonuses don't work.