Holiday bonuses should not be tied to employee performance.

The Three Wise Men came to see Jesus bearing gifts of gold, frankincense and myrrh. These gifts were from their hearts and not from a profit-and-loss accounting sheet. That is how and why most Christians, and also even many nonbelievers, continuously celebrate the birth of Jesus Christ by giving presents to others.

Thousands of contractors and business owners honor this Christmas tradition with company parties and gifts for their employees and their families. All of this effort is greatly appreciated and definitely spreads that “Peace on Earth and Good Will toward Men” message throughout their companies.

Webster’s dictionary defines the word gift as “something transferred by one person to another without compensation.” Unfortunately, some contractors, with good intentions, become the infamous Grinch who stole Christmas by rewarding their employees on Christmas Day solely based on their performance during that entire calendar year.

This is known as the “Christmas bonus.” Webster defines the word bonus as “something in addition to what is expected or strictly due as a money, or an equivalent given in addition to an employee’s usual compensation.’

I am 100 percent in favor of bonuses and 100 percent in favor of giving Christmas gifts, but I am also 100 percent against combining the two. If you think that your employee will give that 110 percent extra effort for 12 solid months just to receive your Christmas bonus, you need to talk with some of your seasoned employees.

Webster’s bonus definition - “something in addition to what is expected” - tells the whole story. Did you ever wonder how much each of your employees expected? Keep in mind two basic facts about bonuses:

1. Once it is expected, it will never be enough!

2. Once it is expected, it will never be appreciated!

Christmas comes on the 25th of December every year and your employees will naturally be expecting at least the same amount or more than last year. Likewise with those end-of-project bonuses. It’s easy to see why your employees would be disgruntled and de-motivated if your profit-and-loss statement justified a lesser bonus or none.

If you are fortunate enough to fraternize with your jobsite employees, then you have heard most of these attitudes regarding bonuses:

“That light at the end of the tunnel is the headlights of a train coming down the track.”

“We got laid off two months before bonus time.”

“They came up with a weak excuse about not being paid on that project.”

“Charlie got the same bonus and his job lost money.”

“The boss’s wife got a new Lincoln and we got that proverbial ‘bone.’”

“My wife spent our anticipated bonus money in early December. Then on Christmas we got a weak excuse from our boss about no bonuses, which put us in debt. That is not what you call a Merry Christmas!”

Keeping Score

I am wholeheartedly in favor of giving a bonus as something in addition to what is expected. I hope you are negotiating a fair deal with each of your employees to clearly define exactly what is expected from him or her, as well as what he or she should expect from you. We call this eight hours work for eight hours pay.

All that remains is to keep score. Either you or your employees’ immediate supervisors need to measure their daily performance, and discuss and document any above- or below-expected effort in their files. This is the critically important recognition and appreciation discussed in the November article. (To access this column from November, visit PM’s Archives by clicking here. Free site registration is required.)

I highly recommend reviewing each employee’s performance file once a month, just as we do with our company’s financial profit-and-loss statements. Your review will assure you that your employee is performing up to par or that you need to get involved:
1. A continuing above-expected performance should be acknowledged with the employee and rewarded with a wage or salary adjustment.
2. Less-than-agreed-upon performance should be discussed privately and documented.
3. Any exceptional one-time extra effort should be acknowledged publicly and rewarded with a bonus. This bonus can be on April 9, July 17, Aug. 16 or whatever date that it was earned, so that it does not become expected on any holiday, end of project or the same day next year.

Noncash Bonuses

Your bonus should be something you are very proud to give and will provide that employee with bragging rights for what he or she earned and received. In addition to money - which varies with the size of your company, the size of the project and the value to the company of the extra effort - these are some of the bonuses that I’ve witnessed companies bestowing on those deserving employees:

An ocean cruise for the employee and his/her spouse. Cruises are reasonable in price and create a lasting memory and appreciation, along with envy from your other employees.

Extra paid vacation days that allow your employee to relax and enjoy whatever he or she wants to do. This bonus is very effective when the extra effort required a lot of overtime or time away from the employee’s family.

Personal gifts that you know the employee wanted but could not fit into his/her household budget, including:
1. Guns, fishing equipment, boats, new vehicles, tires for their vehicle, repairs or remodeling at his or her home, new furniture, etc.
2. Scholarships for the employee or his family members to continue their career advancement.
3. Optional/cosmetic surgery or a medical treatment that is not covered in the company’s health plan.

These personal gifts are very effective and require getting involved in your employees’ personal lives without interfering.

Remember, your employees need recognition and appreciation. And contractors need the company man productive incentive to compete, survive and grow in our great free enterprise industry. In addition to the financial rewards, your personal involvement with each employee’s performance gives you these bonuses:

A proud and productive image in your market area. Your motivated employees display the competitive work ethic that every customer wants on his project.

Your reputation will attract and keep the very best workforce. In addition to minimizing costly turnover, your bragging employees will proudly recruit their friends, relatives and acquaintances.

Your employees have more fun when they are giving a 110 percent effort. When the morale on your jobsite is high, your accident rate is low. That is a proven fact.

The biggest personal bonus for any prosperous contractor is the pride of knowing, “This is my company. My employees know I care about and appreciate them, and I am aware that they also respect and care about me in return. That is the nicest present any contractor can receive any day of the year.”

Merry Christmas and a Happy New Year 2008 to you and yours!

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