Just before New Years, I got a call from a contractor. He was very upset. One of his employees was griping to all the other staff members in the parking lot about how small his Christmas bonus was. He felt he deserved more and was letting everyone else know about it. The contractor saw him sulking around the shop and pulled him into his office to ask what's up. When the employee admitted to bad feelings about the size of his bonus, the conversation got ugly and they both left the meeting angry.
The owner was upset because the employee had no appreciation of what it cost the company to give the annual Christmas bonus no matter how well the company did that year. The employee was upset because he felt he didn't get a big enough bonus and now he was getting beat up for telling his boss who asked what he was upset about. It was a lose-lose situation for everyone.
The contractor was frustrated as he reflected on all the years while the business was growing that he had to take money from his personal bank account just to make sure his employees would have that bonus at Christmas time. The more he thought about it the angrier he got. Didn't this employee know how hard a year the company had? Didn't he care? Yet, the owner always found the money to pay a bonus and now it wasn't even appreciated. As he dwelled on it more and more, he could feel the rage welling up in him. That's when he called me to tell me what had happened. He told me that he wished he could quit paying the annual Christmas bonus altogether.
In short, he was F.A.R. and away from thinking logically. He was acting on pure emotion. F.A.R. is an acronym I developed to remind myself when I'd get emotionally tested not to react until I had allowed my feelings of frustration, anger and rage to pass. I had learned the painful lesson that no good long-term actions came from acting when I was in this emotional minefield.
The only value I found of feeling F.A.R. (frustration, anger and rage) is that, once I calmed down, it was worthwhile to ask myself, "Why had I felt this way? And what did I need to do to avoid being back here again?"
As we spoke more, I surprised him by agreeing that he should get out of the no-win situation of a Christmas bonus. Years ago Christmas bonuses, in general, meant a lot more because they represented a proportionally higher percentage of the yearly salary. But as salaries rose through the years, the Christmas bonus rose only in dollars and shrunk by percentage. It had become more about bragging when someone got a bigger bonus than someone else. And once you give a bonus, it's very tough to take it away or even reduce it, no matter how bad a year the company had or how poorly the employee had performed. So, you're stuck and in the end no one is very happy.
A much better solution is to set up a yearly companywide bonus game based on some form of profit-sharing. If the company has a good year, and the employees have the most to do with that, they will essentially be paying themselves a bonus. The better the year, the more bonus money there is. The very best shops I've been to have some version of this type of game because they know it helps all the staff see how they each play a role. The quality of the company's workers ultimately determines how profitable and successful the company will be and vice versa.
For any reward or game a company creates, there are three rules:
- Rule No. 1 - It is designed to encourage the desired behavior of the staff. And that's why it must be based upon on objective measurement of some vital statistic that, if improved, will benefit the company.
- Rule No. 2 - It has to be self-funding. That means that you do the "what-ifs" first and, based on those calculations, if the staff reaches the goal, they will have created the money for the company that makes paying a bonus a win-win situation.
- Rule No. 3 - It has a limited life and is always subject to review and revision. If conditions change that make this reward or game unprofitable for the company, it must be changed. Letting everyone know up front that this is how we play is critical for buy-in.