Surprising News about Bonuses that Engage Employees

Bonuses that Engage Employees
Most leaders want to use bonuses that engage employees and encourage them to strive to do their best work in a way that aligns with cultural norms and strategic priorities.

Unfortunately, too many well-intentioned reward programs are confusing, misaligned, and wasteful.  Is your bonus program aligned with your people and business strategies?

The Most Common Bonuses Are Financial
Talent management strategies and total rewards programs typically hand out bonuses to spur motivation and reward high performance. Most often these bonuses come in the form of financial gifts, and the recipients are expected to spend the money on themselves in a way that makes sense for them.  Seems to make sense.

Are Monetary Bonuses Effective?
What are the bonuses that engage employees the most?  Do monetary rewards achieve leadership’s objective of encouraging improved behavior and higher levels of performance?

Some employee engagement training specialists say that the opposite is true and that there is a low correlation between financial bonuses and employee engagement.

Why There Is a Low Correlation Between Bonuses and Engagement
Many point to the “have not” affect.  Because other employees (the ones who do not receive the rewards) are apt to be jealous and competitive and thus damage the very team dynamic required for higher performance.  Additionally, research by Tim Judge found less than a 2% overlap between pay and employee engagement levels.

In our Best Places to Work Employee Engagement Survey we also find that pay and benefits consistently have lower correlations to engagement compared to other factors such as:

• Feeling valued
• Managerial effectiveness
• Career development
• Trust in leadership
• Team dynamics

And on the topic of teams, data from our new manager training confirms what the Journal of Business Research found: rewarding team performance improves overall results better than rewarding individual performance.

So What Bonuses Work Best?
What type of bonuses that engage employees work best to lift performance? How should leaders use bonuses that engage employees?

Surprising to us, some studies show that giving bonus vouchers that can be re-directed to the recipient’s favorite charity actually results in happier and more engaged employees overall.  Other research finds that monetary gifts that are to be spent on other employees also help to increase engagement.

Our Take
A good balance of individual and team rewards that align with the overall strategy and culture is a good place to start.  For some corporate cultures and performance environments, bonuses aimed at charities and team events can certainly play a role in increasing employee engagement levels.

Beware however to make sure that your high performers feel like their goals and accountabilities are clear and that their individual contribution is being fairly valued and rewarded.

To maintain high levels of employee engagement, your top performers must believe that if they contribute to the organization’s success, they will be fairly recognized and rewarded considering the value they bring to the organization.

The Bottom Line
As long as your reward and recognition systems are aligned with your strategy, are perceived as fair, and disproportionately reward your top performers in terms of results and behaviors, you will have the opportunity to creatively engage and motivate your top talent to perform at their peak.

To learn more about creating a high performance culture, download 2 Research-Backed Leadership Moves to Create a High Performing Culture