Problems with Bonuses

What sort of bonuses should we pay? by Seth Godin:

Money, it’s been shown time and time again, is a demotivator. I’m not talking about a fair or even generous salary. Being a cheapskate is no way to find a great employee. But once people have joined your team, incremental money–bonuses and the like–usually demotivate people.

He is right. Why salary bonus and other incentives fail to meet their objectives by Dale Asberry.

Lean Manufacturing Visionary Jim Womack On Frontiers Of Lean Thinking [the broken link was removed] by Jim Womack

by bonus systems motivating sales staff to make the month or make the quarter and producing a wave of orders at the end of the reporting period. A better approach to these problems is to revamp the bonuses so they are rolling averages rather that don’t encourage big batches of orders.

Good resources:

Even with salespeople bonus are usually a bad idea, Deming’s ideas at Markey’s Audio Visual:

Commission pay – after 10 people attended Deming seminar they stopped using commission pay “people are not motivated by money” people do have salaries they want or need and will change jobs… to get what they need. For commissioned employees pay set at average of last 3 years salary for 7 commission employees – 1 left.

Commission pay and bonus often set up a conflict between what is in the interest of the company and the employee. They lead to bunching of orders around quarterly quotas, deadlines and competitions. They lead salespeople to think their job is to sell whatever pays them the most not to assist the customer.

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