Don’t Forget the Cake along with the Annual Bonus Icing

As we approach the end of 2012, our thoughts are turning to end-of-year standards such as the annual bonus, the holiday party, and the like (at least this is true for the vast majority of us in the Compensation, Recognition and Total Rewards space). And this is well within the spirit of the season – giving and acknowledging the gifts of others.

Yet these traditional approaches are fraught with challenges. In just the last couple of weeks, I’ve skimmed more articles than I care to count on office holiday parties gone wrong or what to do to plan the perfect office party on a limited budget. The holiday party isn’t the true end of year challenge, though.

The annual bonus is.

My Compensation Café colleague, Dan Walter, ably pointed out why in his post yesterday about cash or cachet. As Dan said:

“Cash is great. Let’s face it, we could all use more of it and would be happy if someone gave it to us. Unfortunately, every company has a limited amount of cash to spread around.  Even in the best years companies do not have an endless supply of money. In our current era where 3% is considered a good merit increase and broad-based LTI incentives seem to be losing ground, we all need to find better ways to stay competitive in the battle for talent.”

A SmartPulse poll earlier this week tells us why we should be concerned about the limited amount of cash to spread around.

 

Of course, we can read between the lines on these results in several ways:

1. Those leaving were already planning to leave and are just waiting until they get the extra cash.
2. The bonus amount so insulted some, it was the final straw.
3. The bonus doesn’t matter to the majority.

Regardless of how you read this, the solution is not to give, as SmartBrief suggests, “an extra few dollars in their bonus to avoid the possibility of losing them and spending multiples of that money finding and training someone new.”

Why not take such a simple solution? Because the challenge is much more complex than that. A recent Right Management survey shows 86% of US workers say they intend to look for a new job in 2013. (Be sure to read Mark Toth’s post on reading between the lines on those results.)

Regardless of intent to actually leave in the new year, think of the consequences of 86% of your employees not being fully focused on the task at a hand because they’re daydreaming about their next job or surfing job boards if even passively looking for one.

A few extra dollars in the annual bonus isn’t going to solve that problem. Look, I’m not saying don’t do an annual bonus at all. Just remember that it’s only one element in Total Rewards, and it should merely be icing on the cake after a year’s worth of ongoing, timely, frequent and very specific recognition and rewards. That’s what builds loyalty and increases retention among your employees – a continuing sense of knowing that what I do every day matters and makes a difference in the success of the team, the company and the customers.

While icing alone may be nice treat, enjoying the entire cake is surely more enticing.

As Globoforce’s Head of Strategic Consulting, Derek Irvine is an internationally minded management professional with over 20 years of experience helping global companies set a higher ambition for global strategic employee recognition, leading workshops, strategy meetings and industry sessions around the world. His articles on fostering and managing a culture of appreciation through strategic recognition have been published in Businessweek, Workspan and HR Management. Derek splits his time between Dublin and Boston. Follow Derek on Twitter at @DerekIrvine.

Image credit: Martin Senekal Confectionary Design 

Comments

[Jemma Taylor]

Very Nicely Explained. That’s just what creates respect in addition to boosts retention between your personnel – a continuing impression associated with realizing that just what I do each day concerns in addition to is important in the accomplishment in the crew, the business as well as the shoppers.

[Derek Irvine, Globoforce]

Thanks for the vote of validation, Jemma. Much appreciated!