Are bonuses necessary?

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Hands throw money in the air to illustrate bonuses

When Neil Woodford – one of the UK’s best-known fund managers – scrapped bonuses at his firm earlier this year, it reignited the debate over financial rewards. Do you think they’re good for business?

Nick Goldberg debates whether bonuses are necessaryNick Goldberg is CEO UK and Ireland of LHH Penna

Bonuses can be an important tool to encourage and reward high-performing individuals, but only if businesses stay true to the very meaning of the word. Bonuses must be an ‘added extra’ rather than something that is already assumed or expected as part of a remuneration package.

There is also a vital need for bonuses to be aligned around the common goal of achieving the organisation’s targets. Some teams work in unconventional ways and this must be respected, as specialised approaches can breed creativity. However, bonuses must be tied to employees who are propelling the organisation forward, to ensure the right people are rewarded. This also highlights the importance of communicating overarching company goals to employees, who should be kept up to date on how their contributions are aiding the business.

Bonuses do not necessarily have to come in the form of cash. Some employees prefer other perks such as extra time off, gym/activity memberships, or company equity/shares. Businesses need to seek feedback on what type of incentives their employees expect and prefer.

Employee engagement surveys have repeatedly provided proof that feeling rewarded is a vital part of engaging employees. Whether a bonus is presented as a perk or in cash form, the important aspect is incentivising and engaging the employees, which is a simple way to truly create a human interest in corporate goals.

@lhhpenna

Andrew Barnsley debates whether bonuses are necessaryAndrew Barnsley is founder and managing partner of Adam Street Advisers

In some professional environments bonuses have come to be seen as an entitlement, which does little to motivate employees. At Adam Street Advisers we encourage a risk-sharing, entrepreneurial approach to business. While we are aware that people aim to progress in their personal careers, we expect the whole team to be focused on the success and profitability of the firm as a whole. Everyone, at all levels, is encouraged to lend support across all areas. By investing in the organisation’s future success they are securing their own position within it and, in turn, giving us the means to reward them.

If individuals of the team were business owners, for example, it is unlikely they would prioritise a large sum of money as a ‘bonus’ for themselves and sacrifice the future growth prospects of their business.

We encourage the whole team to take ‘emotional ownership’ of the business. That way, everyone is equally motivated to improve the success of the firm. If we believe individuals are consistently going above and beyond, and business is performing well as a result, then naturally everyone who has contributed to the success will share in the financial rewards. We don’t want to encourage a culture of entitlement or reliance on a ‘guaranteed bonus’. We believe the best work is achieved when people are driven by a genuine desire for the business to succeed, and the financial gain will follow.

adamstreet.com

Do bonuses help or hinder business performance?  Let us know your views by emailing here

About author

Hannah Gresty

Hannah Gresty

Hannah Gresty is the assistant editor of Director magazine. She previously worked on a local news website and at a fashion PR company before joining the Director team in 2016.

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