Apparently, many managers are unconvinced about the motivational effects of bonuses. Bulletpoint’s research of over 200 managers from different countries found that:
* Bonuses have little impact.. on behaviour or on daily decision making. Managers confessed to lowballing (setting low targets to ensure payouts)
* Big bonuses linked to unit performance create dysfunction...because when the bonus makes up big part of pay, time spent on deciding allocation is high; also unit (rather than corporate linked bonuses) foster ‘gaming’.
Other interesting findings show:
* Profitability is key to efficacy: Bonuses are more likely to have a positive impact on behaviour when the firm’s performance is strong
* Teamwork not pay predicts firm’s performance: The extent to which a firm has a team-based culture is a far more reliable predictor of performance than bonuses. The paradox: managers say bonuses have only a slight impact on motivation yet they pay them primarily to motivate. Why?
Possible explanations:
* Copycat behaviour - if a competitor pays a bonus, organisations feel they must too; also bonus payments are often highlighted - seemingly without reason - as a best practice.
* National differences - bonuses are a US idea exported globally through e.g. multinationals, joint ventures and arguably work better in US where individuality and tolerance for uncertainty are greater than in Europe.
For more business insights, dip into the Bulletpoint archive or if you would like to register for access to the archive email us
