Last Updated Sep 24, 2010 12:49 PM EDT
The annual bonus rewards past performance. Most studies I've seen report that bonuses are not great at motivating current performance, unless the employee is doing piece work.
What works better? Eric Mosley, writing on HBR.org, suggests frequent but smaller payments given to a large numbers of employees.
"The answer is a more strategic, thoughtful approach to conditional rewards, involving smaller payouts given year round and, critically, targeting the vast majority of the workforce -- not just a privileged few. "
Employees earn one of these payments for actions that reflect company goals or values, not for specific project work. I could see, for example, rewarding a team leader for her determination to involve junior staff members on a critical decision rather than for a successful outcome of the project.
I wonder if the most successful bonus program shouldn't be a blend that targets individual goals with corporate milestones? How would you structure a rewards program?