Soul-Crushing Bonus Structure * What Would You Do?

A recent question in the “Dear Lucy” column of the Financial Times nearly made me fall out of my chair in shock, but it highlights perfectly the way most cash bonus programs are structured.

The letter writer, a female vice president, tells of a very low bonus she received after a very high evaluation from her boss, which the boss justified by saying she had gotten as much as possible and more than people senior to her. The letter writer then found out “others with worse performance got far more money.” The writer was very upset by this and wrote to Dear Lucy to find out if she had any recourse.

Lucy’s response, in part:

“You think a bonus is a reward for doing a good job. In fact, it is a prize you get for playing a game that is complicated, skilful and highly political. The boss controls the money and information, and the players lobby to get the biggest slice.

“The winners are the people who get the biggest bonuses, but neither the winners nor the losers will know for certain whether they have won or lost because the boss will tell everyone they have won, even if they haven’t. The result is mass dissatisfaction and paranoia. Secrecy and disinformation abound.”

I know many people reading this post have experienced such soul-crushing bonus programs themselves. And this answer is why I advocate so strongly against cash-based bonuses. Recognition and appreciation of excellent work is not a competitive game in which a prize can be won. Recognition and appreciation should never be political. Recognition and appreciation should never be secret. Structuring bonus programs in the manner as the one described only serves to breed dissatisfaction, disengagement and an extreme lack of trust.

True, successful recognition, rather, is transparent, public or at least published (to account for those who may not enjoy being called out in front of colleagues, even for praise), and above all else, sincere. In this way, everyone knows the score – appreciation and recognition is shown to those who live the values and achieve the strategic objectives. Nothing is hidden and a culture of appreciation can begin to grow in a company – instead of a culture of in which your top performers, like this letter writer, are advised to go find another job.