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Personal Growth

Time to Ditch Year-End Bonuses?

Rather than handing out an annual cash bonus, companies are realizing that shorter-term incentive structures do more to motivate employees, as well as reward them for a job well done.

What’s the Latest Development?

Eric Mosley advises companies on employee recognition strategies. He says a human resources executive at a global software company told him that the company’s employee recognition program was much more productive than its annual bonuses. However, the pool of the money for the latter easily exceeded that of the former. If a company retains its practice of giving annual bonuses, Mosley says the bonuses must work to increase employee engagement and decrease turnover in key positions. 

What’s the Big Idea?

Mosley recommends tying bonuses to values, goals, and recognition: First, don’t wait until year’s end to reward employees. The time lapse between a job well done and a year-end bonus makes the reward less meaningful. Second, when giving a reward, give something more meaningful than cash. Bonus money is typically spent on necessities like the week’s groceries. Third, don’t just award top performers. Create unity in the company by recognizing everyone’s efforts, advises Mosley.

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