Oxymoron Challenge * “Bonus Guarantee”

Oxymorons are fun. There are the obvious ones – jumbo shrimp, airplane food, military intelligence. And then there are the ones you stumble across. Like “bonus guarantee.”

After the fallout from the recession and the reaction to ridiculous bonuses, not to mention the “soul crushing” structure such programs can take, I see hopeful signs that reliance on cash bonuses as the primary means of recognition reward is diminishing. One such sign was reported by WorldatWork based on data from Mercer:

“Almost all participants [30 financial services organizations from Europe and North America] noted that they have changed the weighting of components in their pay packages. 70% have increased base salaries while decreasing annual cash bonuses (94%). …

“94% of respondents have made or plan to make changes to their annual short-term incentive (STI) plan, commonly known as "the bonus." One-year bonus guarantees are used less than in 2009, with 57% of organizations having limited or eliminated multi-year bonus guarantees.”

I’m glad to see that base salaries are rising. That is necessary to counter what the CIPD reported on two years ago:

“Bonuses have become a recruitment and retention tool rather than a reward for good performance. There are so many corporate governance issues around permanent salaries that the only ‘wriggle room’ has been bonuses. That’s why in recent times there have been sums that have been seen as excessive, and the phenomenon of people asking for guaranteed bonuses – degrading the principle of paying for performance.”

It’s the comment in the second paragraph of the Mercer results I quote above that really gets to me, though – “bonus guarantees.” I’m also glad to see these continuing to fall, counteracting (I hope) what Bloomberg also reported on:

“More Wall Street employees received bonuses for 2008 than were expecting to, though many remained unhappy with them. … What this shows is the bonus culture is very deep set in the securities industry. There’s an entitlement culture amongst a number of people in the industry, which I think in the current industry is very misplaced.”

That’s why I argue so passionately against cash-based bonuses. They quickly become an expectation and an entitlement. Pay employees a fair wage. Recognize them with “After/That” appreciation and rewards, which are a surprise for work well done in alignment with your values and never an expectation. But stop playing around with the oxymoron of “bonus guarantees.”