Forget bonuses: Here’s how to really reward people

Think of the best reward you were ever given at work. Actually, think of the best reward you were given anywhere. I was recently hosting a panel of seven business leaders and posed that question to them. This is what they said:

1. Time off.
2. The chance to learn something that was not directly linked to my job.
3. A hand-written note from my busy boss.
4. The opportunity to give something back through working with a charity.
5. A life changing bonus.
6. A personalised gift.
7. A peer-nominated award recognising me for the work I’d done.

What struck me from their responses, apart from the variety, is that most of their rewards shared three things, namely; they were:

• Unexpected – creating a sense of surprise and delight
• Thoughtful and personalised – based on what they needed, wanted or valued
• From someone whose good opinion mattered to them

And yet, when you consider the approach that most companies take to reward, we typically choose a bonus scheme linked to dubious performance ratings. Our bonus schemes have none of these features. They are expected – often leading to a sense of entitlement (“I got xx last year so I expect the same in this”). They are depersonalised and lack any recognition of what they need, want or value, the assumption underpinning them being that money is the great motivator. And whilst they may be accompanied by a letter from their boss, the scheme itself is managed across the company and lacks the sense of intimacy that great gifts have.

Like many HR professionals, I have spent countless hours trying to perfect the bonus scheme. Trying to strike the right balance between base pay and discretionary reward. Trying to find ways of rewarding the right behaviours through a combination of group, department and personal elements. Trying to make it achievable and stretching at the same time, etc. Despite all this effort, I can honestly say that I have never introduced a bonus scheme that made people feel good about working there. Often quite the opposite. So why do we spend millions on creating a reward that has the same impact as the annual Amazon voucher from your Gran?

Well, usually for good and valid reasons. These are the typical explanations:

“We don’t trust managers to do reward properly so we have to have a scheme”

“Bonuses enable us to pay for performance”

“We are a large complex organisation so we have to have one size fits all”

Whilst there may be some truth behind these, I suspect that in the end, it’s just easier. It’s easier to give out a bonus than to do something thoughtful and personalised and outside of a structured scheme. Moreover, we’ve seen money as the great motivator for so long, we have stopped looking for better ways to reward our people – ways that are based on a real understanding of their different needs and desires.

Excitingly, there are companies who are doing it differently. These companies are rejecting the traditional bonus scheme in favour of reward practices that are based on a different set of assumptions, namely:

• They want to surprise and delight their people – to make them feel great about getting a reward
• They want their rewards to be timely – at the point where it’s truly deserved – and is unexpected
• They want to focus on what their people really value and want
• They want to make it personal and for the recipient to feel special
• They recognise that money, whilst important, is not the great motivator we have believed for so long and find alternatives instead.

Here are my top tips for designing an approach to reward that makes your people feel – well, rewarded.

Get the issue of money off the table.

Companies such as Netflix and Atlassian have been doing this for a while. Echoing the messages from Dan Pink’s book on motivation they aim to get the issue of money off the table by not paying bonuses and instead putting all of the expense into bigger salaries to “give people freedom to spend their salaries as they think best.” The inadequacies of using money to motivate is a huge topic in its own right and not the focus of this blog but there’s more about that subject here.

Reward the team not the individual

In Margaret Heffernan’s brilliant book “Wilful Blindness” she dedicates the whole of Chapter 10 to the problems with bonuses and their negative effects. One of the key issues she raises and backs up with extensive research is the role that individual bonuses play in destroying a culture of collaboration and teamwork. Given that most companies I meet cite collaboration and breaking down silos amongst their main priorities, maintaining a reward structure that encourages selfishness and individual over team effort seems counterintuitive. One example of a different approach comes from TINT a US social-media company who got rid of individual sales commission. They recognised that the sale process is a complex one, involving several different employees in the customer lifecycle (including marketing lead-generation, account managers, developers solving bugs, ongoing customer support) and that paying sales people differently to the rest of the organisation is divisive. They wanted to weed out selfish behaviour and encourage true collaboration and their solution was to replace individual commissions with a monthly team bonus to reward everyone who touches the customer, with a transparent (if complicated) calculation to ensure that pay is distributed fairly.

Reward each other

Most reward schemes follow a traditional parent/child philosophy where the company/boss (the “parent”) rewards the employee (“the child”). Where the reward is given from one human being to another this can still have a positive impact but too often the reward or bonus seems to come from some anonymous company source or HR. Companies are beginning to experiment with encouraging and trusting employees to reward each other – adult to adult. I like what Next Jump have done with their reward structure. They run monthly “Top 10” awards. What makes the awards powerful is that they are peer-nominated and voted for by employees (not decided top-down by management). For the monthly Top-10 award, only one question is asked: “who most helped you to succeed this month?” It has nothing to do with how much revenue or profit you made – its sole focus is how you helped others. Asking “who helped you to succeed” dramatically changed the type of nominations received. It became all about people and recognising the right behaviours. The stories of all nominees are visible on a live-feed to make people feel good and to encourage similar nominations.

Go big on spot rewards

You’ve just worked your butt off on a project or you’ve just done something brilliant – but typically you have to wait ages till bonus pay-out date to have this recognised, by which time the reward feels disconnected from the effort and a bit stale. We’re seeing an increasing focus on spot rewards – given at the time the effort or brilliance is actually shown. Whether this a cash reward, time-off or a gift – the impact is so much more positive than the net amount after tax up to 6-9 months later.

Just say “thank you”

It’s no secret that being praised often makes people feel good. Pride, pleasure and increased feelings of self-esteem are all common reactions to being paid a compliment or receiving positive feedback. This is because being praised triggers the release of dopamine, a neurotransmitter that helps control the reward and pleasure centres of the brain. As well as making us feel good, dopamine can also contribute to innovative thinking and creative problem-solving at work.

Incorporating this understanding of the value of praise into your reward approach is fundamental to achieving positive results. One company who really gets this and is doing something about it is the US data management and storage company NetApp. Vice Chairman Tom Mendoza wanted to make sure people knew how much he appreciated their efforts and decided to start something that he calls “Catch Someone Doing Something Right.” Every day, Tom calls between 10 and 20 employees across the company to congratulate them on a job well done – as nominated by peers or managers. Calls can be a short as 30 seconds but have a powerful effect.

Rewards should be something that every employee enjoys and yet we persist with expensive, complex and onerous bonus schemes that often have a negative or neutral effect. In the desire to avoid the negative impact of thoughtless managers, we create a scheme they can’t wriggle out of. Whilst this may tick the HR box, it isn’t doing what we need and what our employees want – to feel valued, to feel special and to feel rewarded.