REWARDING PERFORMANCE
Shortcomings in management of bonus plans laid bare by Industrial Society
New research by the Industrial Society has exposed a litany of shortcomings in the implementation and administration of bonus plans. All too often, it seems, the motivational effect of bonus schemes is being undermined by employers’ unwillingness to consult their employees.
Inadequate consultation
Although for many progressive organisations it is an article of faith that the involvement of employees in the design of bonus schemes is a key factor in determining success, eight in ten respondents to the Industrial Society survey said that unions or employees representatives were not involved in determining the level of bonus payment.
Poor communication
The study suggests that careful communication is a much overlooked cornerstone of effective management of bonus plans. Almost two-thirds of the 1,128 survey respondents do not know what criteria their scheme use for determining levels of bonus payment.
The Industrial Society found that communications are typically confined to letters, team briefings and appraisal meetings. Using more face-to-face methods and a sustained communication campaign could help update and increase employees’ knowledge and understanding of the scheme, says the report.
Lack of transparency
For the Industrial Society, another critical aspect of scheme administration is to make sure employees are set clear targets. It requires consistent communication to affected employees, who must have a clear understanding of what they need to do in order to trigger a bonus payment.
Sadly this is not happening as often as it should: many organisations give their employees too little information about practices that apply to them. In fact, only 53% of survey respondents report that the way in which their bonus payments are calculated is transparent for everyone in the organisation.
Criteria for success
So, how should your organisation approach introducing a bonus scheme? Here are some key recommendations drawn from the Industrial Society report:
| 1. Objectives | When starting a new scheme be clear about its objectives. |
| 2. Integration | Bonus schemes need to be developed as an integral part of the organisation’ s wider pay and reward strategy. |
| 3. Consultation | Consult employees widely on targets to get their involvement, commitment and buy-in. |
| 4. Communication | The organisation must ensure that employees have a clear understanding of what they are required to achieve in order to trigger a bonus payment. |
| 5. Payments | Make bonus payments meaningful and relate them to the task for which they are awarded. |
| 6. Simple | The scheme itself must be simple, open, transparent and well communicated. |
| 7. Line of sight | The line of sight — whereby individuals actually see the link between achievement and reward — is crucial. |
Source: Adapted from Bonus payments , Managing Best Practice no. 82, April 2001, The Industrial Society.
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Title: Bonus payments , Managing Best Practice, no. 82, April 2001, The Industrial Society.
Methodology: Based on qualitative and quantitative research. For the survey, questionnaires were sent in January 2001 to a random selection of 5,600 human resource specialists drawn from the Industrial Society’ s database.
The report also contains case studies of:
B& Q
BOC Distribution Services
HSBC Asset Finance (UK)
Natural Environment Research Council
Pizza Express
Van Den Bergh Foods.
Sample size: A total of 1,128 personnel and HR specialists supplied information — a response rate of 20.1%.
Business sectors: The survey is broadly representative of regions, sectors and size, but is not a scientifically structured sample of the economy.
Availability: Contact the Industrial Society, tel: 0870 400 1000. Managing Best Practice is the Industrial Society's monthly report on achieving excellence in key areas of managing people . For more details visit www.indsoc.co.uk/trg_resources/books/mbp/mbp_home_page.htm.
The Industrial Society can be found at www.indsoc.co.uk.