Replacing holiday bonuses with a more objective system will have your company galloping toward success.

Do you resent having to give your employees a holiday bonus even if they haven’t earned it?

I know I did.

And I was lucky enough to have money in the business to pay those bonuses. Compare that to a lot of other contractors who have to take money from their own personal bank accounts and away from the gifts they plan to give their own families at holiday time just to scrape together the money to pay employee Christmas bonuses.

At my shop, what to give each employee as a bonus was based loosely on:

  • What did they get last year?
  • What did everyone else get?
  • How long have they been here?
    In other words, what it wasn’t based on is anything objective.

    Now the fact was most people liked getting the money because it came at the end of the year at a time when holiday bills come rolling in. But the truth was the amount of the bonus had gotten proportionally smaller as salaries over the years had risen. A $150 bonus back in the days my dad gave bonuses in the 1950s and 1960s meant a lot more than $500 or so I was giving by the 1980s and 1990s when inflation had kicked in and employees’ salaries had increased so much.

    The real benefit of getting a nice-sized bonus was to be able to compare it with their buddies and say, “I made more money than you.” And you know they compare bonuses all the time. They compare salaries, don’t they? You bet they do. Nothing stays a secret for long, especially payroll.

  • No Real Value

    What really stinks about these holiday bonuses is that if you were once a valuable person to the company and slacked off, we couldn’t cut your over-sized bonus. Or, if we’d have trouble replacing you even though you weren’t all that good, we were obligated to give you an undeserved bonus to keep you from skipping out on us.

    Hey, are you really going to have the guts to reduce someone’s holiday bonus? Not even Scrooge would do that. Besides, it would just tick them off enough to leave.

    The best way I’ve learned to replace the holiday bonus is to have a “company-wide game” instead. The company-wide game is just a very small part of a very detailed reward program that Ellen Rohr and I have created for the exclusive use of our clients. What follows is a very brief overview:

    Everyone on staff participates in this game. So, everyone needs to understand how the game is played. This starts with the process we used to arrive at the annual company sales goal. We need to do this through the budgeting process so we know that, if goals are met, the money needed to pay the company-wide bonus is not out of the company’s pockets.

    Typically, the bonus is 2 percent of annual salary. This number is known and should have already been added into our annual budget used to arrive at our annual sales goal. If they hit the annual sales goal and profitability target, they get the bonus and we’re happy to pay it.

    A good company-wide game should address measurable profitability. This profitability goal is the one you used to create your annual budget and your annual sales goal. The cost of providing this special bonus for all full-time staff is an excellent way to bring the company together once a month to talk about how we all play a role in sales and profitability.

    A big graphic representation posted somewhere in the office that tracks the progress weekly and monthly makes it more fun and more real. Once again, any reward programs are self-funded. Everyone is only rewarded based upon hitting the goals, which means they pay themselves the bonus.  

    The Real Purpose

    The real purpose of a company-wide game is to help the company come together. Your training helps them understand that how the CSR handles the call, how the dispatcher maximizes production and how the tech handles the call all affect the company sales and profitability goals, as well as their own pockets.

    Offering bonus compensation based upon quality sales and quality work proves to them that they’ll be making more money if they do it the right way. This should be an incentive to adhere to tougher standards. Techs can give themselves a raise by producing certain measured results.

    Do this and you keep your job, thanks. Do this and we’ll coach you for this long; after that, go help some other company. Do this and we’ll reward you.

    Employees will begin to think one of two things. The system stinks, or “How do I get that reward bonus?”

    Finally, here are some additional guidelines to consider:

  • Employees need to be with the company six months to be vested.
  • Full-time employees only.
  • This is the last item after the budget is assembled.
  • It’s pro-rated for terminated employees that are vested if we hit company-wide game contest goals at the end of the year.
  • It’s something that can be covered in the operations manual under the general employee policies section, if you keep it updated. 
  • The reward is a 2-percent bonus based on an employee’s salary (no commission!) and it’s distributed at the end of the year only if the company hits both the annual sales goal and annual profit targets as defined in the annual budget. 

    End the annual holiday bonus and put the company-wide game to work for you next year and make a horse trade that will be sure to have your company galloping toward success.

    (For a different perspective on holiday bonuses, see Paul Ridilla's column this month.)