In my last post, I referenced academic research on the effect of bonuses on innovation in an organization. While interesting and informative, I prefer research and surveys from real-world work situations. Why the bias? Humans can be unpredictable and there are simply too many factors to attempt to control for in an academic setting.
To that end, today I share research from WorldatWork on bonus programs. The results reported are from a survey of WorldatWork members, including participants from an earlier survey on salary budget and others with compensation in their title. Findings reflect the turnaround in the economy, the reinvigoration of the war for talent and the attempts to find other ways to recognize excellence beyond diminishing merit increase budgets. Key excerpts from the survey are below.
“In this year’s iteration of WorldatWork’s ‘Survey of Bonus Programs and Practices’ all bonus programs have stopped their downward movement observed since the 2009 recession, with two of them (sign-on and retention) used at higher rates than in any other year of this survey. This may indicate that as the economy is turning around, the war for key talent may be heating up and getting and keeping the right talent is paramount, as can be seen in the sign-on bonus and retention bonus programs. In addition, with continually small incremental increases in merit budgets, spot bonuses may be a means by which to recognize talent for special excellence during the year.”
Image Credit: WorldatWork
The War for Talent
I agree with the WorldatWork analysts (and numerous other industry researchers) – finding and keeping good people is once again a top-of-mind challenge for organizations across industries.
“Three of the bonus programs (referral, sign-on and retention) appear to be following similar trends correlating to a need by organizations to ensure they have the talent necessary to grow their businesses.”
But company leaders are missing an opportunity to feature their investment in employees as part of their culture when recruiting for new talent. This is a significant overlooked opportunity, in that candidates are looking for companies with an employee value proposition that shows the company is committed to helping them achieve their own goals for excellence throughout the year.
“Although most respondents indicated a positive effect of bonus programs on employee engagement, motivation and satisfaction, very few are consistently featuring any bonus programs when recruiting.”
Moving Beyond Compensation
Spot bonuses are particularly powerful for helping employees make this connection as they are, intrinsically, more frequent than an annual bonus and uniquely tied to the individual contribution of the person being recognized. That’s likely why organizations budget for these types of bonus programs more often than the others.
“While only approximately one-third budget for sign-on and retention bonuses, 41% budget for referral bonuses and 53% budget for spot bonuses.”
Of course, that doesn’t negate the importance of all four types of bonus programs, each designed to address different needs in the employee’s tenure with the organization. Bonuses can also give more flexibility than strict pay-for-performance merit increase structures or a limited compensation pool.
“29% of participating organizations are using all four types of bonus programs, an increase of 20% from 2010. This may be a sign of an increased strategy to use different means to recognize talent when other forms of cash compensation are restricted.”
Of the four types of bonuses referenced in the WorldatWork study, which do you use in your organization? Which do you see as more effective in achieving short- and long-term goals?
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, Montreal and Boston. Follow Derek on Twitter at @DerekIrvine.
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