Bonuses: Are You Motivating Enough People?

Stories of the passion Wall Street stockbrokers and other financial sector employees have for their profession is legendary—have you seen The Wolf of Wall Street? Today’s Wall Streeters might not be having quite as much fun, but they probably are smiling broadly. Last week, The New York Times, referring to numbers provided by the New York state comptroller, reported that the average bonuses to Wall Street employees in New York City rose 15 percent to $164,530.

Does your organization offer bonuses to non-salespeople? Companies routinely offer a commission to salespeople, which some might call bonuses, in addition to actual end-of-year bonuses if they meet sales goals. It is understandable that you would want to motivate these key revenue generators in your organization. But why is it so comparatively uncommon for mid-level and entry-level, non-sales employees to be offered bonuses?

The bonuses meted out to the highest-level executives of large companies have always bothered me. I’m irked because in many cases, their base salaries are usually sufficiently high without the bonuses. Instead of the bonuses working similar to a salesperson’s commission or a waiter’s tip, in which the base payment is relatively low so the bonus or tip is needed to make the payment fair, the high-level executive usually already has a staggeringly high salary. You could argue that once you reach that level of wealth, the motivation for even more is negligible. After all, if you already make $50 million a year, how much more improvement does your lifestyle require?

On the other hand, thinking of this in purely practical terms, think of the motivation an entry- or mid-level employee (regardless of whether they are in sales or another line of business) who makes $30,000 to $60,000 would feel to exceed individual or group goals and make even $10,000 more. I don’t know about other mid-level employees, but an extra $10,000 (or even an extra $5,000) could go a long way for me.

My thought is it’s a better investment to spread small bonuses across a wide swath of employees, rather than put all of a company’s financial eggs in the basket of one already over-paid top executive. You’ll be getting more bang for your buck motivating hundreds of employees (maybe even 1,000-plus in a large multinational company) rather than just one.

I once worked at a company where it was rumored the CEO had been incentivized with a $100 million end-of-the-year bonus if he met company profitability goals. We never heard if he received that huge payout, but most of us, stuck in a salary freeze, were not motivated. Imagine if the company had divided up that $100 million across the organization so many employees could receive a bonus that would be the equivalent of a penny to that CEO, but would have meant a significant lifestyle improvement to us—a trip we always wanted to take or a long-desired purchase.

I would urge companies to think of motivation in broad, company-wide terms. After all, the top executives are primarily “planners” and “visionaries.” What are you doing to motivate the “little people” who need to carry out their plans?

How does your company handle incentives and bonuses? Just for salespeople and top executives? Why? Do you see the value of using bonuses to incentivize a wider swath of employees?