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Bonus systems – the poison, which destroys the true motivation

The Czech business newspaper ( Hospodářské Noviny ) published in april the results of a motivation survey among employees in the Czech Republic. According to this survey nearly 80% of  the employees in the Czech Republic are not motivated or even totally demotivated at their job. An alarming high figure, but not really surprising.

People miss a fair renumeration, the oportunity for self realization at their job. They also miss the oportunity to use their creativity and many people feel very uncomfortable with the company culture and the company communication.

People are not robots, where it is enough, just to program them and the robots will do, what the management expects. People are human beings and everyone has his individual character and his individual needs.

Many top managers think, that the best way to motivate the employees is to introduce very complicated and often totally intransparent bonus systems, because money as a motivator has always worked ( or may be not ? ).

My point of view is, that the existing bonus systems in most of the companies are the poison, which does not heel this strong demotivation among employees, but on the contrary it causes the desease.

 

Bonus systems in the current forms are the dinosaurs of the 21th century and they are dammed to doom ( unless the companies do not get bankrupted before due to totally demotivated employees ).

The defendants of those so called „ motivation systems “ rely on the assumption, that, if you offer a bonus to the employees, they will deliver excellent performance. Those people believe, that employees are like fishes – you just have to offer them an attractive bait ( the bonus! ) and the employees will deliver excellent performance. Fortunately people are not fishes!

Every human being is different and has his own individual motives. Therefore this universal remedy – the standardized bonus system – cannot work.

 

However, I see the main problem somewhere else: The so called bonus systems are not really bonus systems, but they are malus systems ( the opposite of bonus systems ).

What do I mean with this statement? Let me just show you a classical example from the business practice: During an interview the recruiter asks the candidate for a sales position, how much he would like to earn per month. The candidate would like to earn at least 5.000 Euros gross per month. According to him this amount seems to be an adequate remuneration for his performance. The sales manager tells him: „ Look, we can only pay you 4.000 Euros fix, but if you will reach your targets and perform very well, you can get another 2.000 Euros per month as a bonus. In other words the sales manager wanted to say: „ I am not really convinced, that you will really deliver an excellent performance.So, if I cannot withhold a part of your income, you will not work, like I want you to work.“  The sales manager assumes here ( of course he does not say it like this – it would not sound nice ), that the employee will not deliver a top performance and that for this reason there will be a motivation gap between the actual performance and the potential performance.

The nice bonus turns into an ugly malus!

 

However, in the awareness of the employee the bonus part always belongs to the income as a fixed part, with which the employee counts. This is an unconsciously effect. Therefore the employee will perceive it as humiliating and demotivating to run after a part of his income, which he believes should rightfully belong to him anyway.

In case, that the employee does not get his planned income ( fixed salary plus bonus – sorry: malus ), he will perceive this unconsciously always as unfair. The management can try ten times to explain him with so called rational arguments, why the employee has not obtained his full bonus. The poison of the bonus ( sorry: malus ) systematically destroys the willingness of the employee to deliver high performance and it also totally destroys his motivation.

There does not exit an absolute fair bonus system, but there are always big justice ( fairness ) problems.

A bonus ( sorry: malus ) is like a hidden threat towards the employee: „ If you do not achieve the targets ( who actually defines the targets ? ) in the way like I want it, than you will not get an important part of your remuneration.“ The bonus as a kind of a negative suspected punishment will lead to the total demotivation of the employees.

 

The most absurd situation arises in sales, if the management decides ( due to so called strategic reasons ) to link the amount of the bonus only to the sales of certain products. The same management is then surprised, that the sales employees do not do any cross selling and that they only sell certain products.

From my point of view, it is only logical, that that the salesman concentrates on those products, which are directly linked to the amount of his bonus ( sorry: malus ).

In particular in the banking sector ( but not only there! ) the client advisers are forced by absurd bonus systems based on evaluation of the different products in percentage, to sell just those products, which have a direct influence on the amount of their bonus ( sorry: malus ).

Therefore the salesman will not focus on the needs of the client, but on his own needs to sell only those products, which will guarantee him, that he will get his bonus. The satisfaction of the client with the product is not really important here!

The salesman concentrates his energy on the fulfillment of management directives in order to secure his income ( fixed salary plus bonus – sorry: malus ! ).

The result is that the salesman will concentrate only on fulfilling the plan – he will definetly not act like an entrepreneur and he will not try to do his best to provide an excellent service to the customer ( because he is not paid for this! ).

I always thought, that brainless fulfilling of the plan is part of the  so called „ real existing socialism “, which disappeared after the soft revolutions in the communist countries – maybe I am wrong?!

 

Mechanical and complicated bonus systems do not lead, according to my experience, to a long term better motivation and performance of the employees. They force the employees only to calculate all the time the amount of their potential bonus and they lead to manipulation of the variable part of the employees income. The employees use all their energy to focus on the bonus and they do not focus on the clients needs and on an excellent customer service.

Complicated and intransparent bonus systems prevent and destroy, what they are supposed to support -  the true motivation of the employees, which should focus on their work.

With bonus systems, it is like with the poison arsenic: in small amounts, it cures, in big amounts it kills!

How can we get out of this dead end?

Companies should pay their employees fair and good salaries and then the management should demand from the employees the required performance!

If the management ensures, that the employees can focus on their work and on the client instead of running after the bonus, then the employees will have fun at work, they will be motivated and as a result they will deliver excellent results!

 

By Jörg Petzold, international consultant and motivational expert