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Scoring bonus points
20/05/2008 08:34 - (SA)
Chris Moerdyk
Well, it's wage negotiation time again. An opportunity for bosses and workers to square off and arm wrestle wage increases for the next few years.
And once again no-one will think about dealing with the problem of bonuses. Which is strange because nothing causes more wailing and gnashing off teeth in business today than bonuses. They're supposed to motivate but often they don't. Let me explain.
It was probably just after Adam and Eve got turfed out of the garden of Eden and told to look after themselves that Adam decided to go into business, register a CC, get Eve to handle the phone and hire a couple of workers with the promise that if things went well they could expect a bonus.
And ever since then, like original sin, the bonus has been a bone of contention. It has caused more friction, more dissension, more argument, more unhappiness than practically any other component of the relationship between employer and employee.
Which is silly really, because the idea of a bonus is not difficult to grasp.
Even a grade one kid with a latent learning disorder wouldn't have too much trouble understanding what it was all about.
But somehow, company executives, usually grown men with straight A matrics, cum laudes at varsity and up to their eyeballs in MBA's, seems to battle with bonuses.
The problem of course is communication.
Did you get the memo?
Usually what happens is that the board takes a decision to implement a bonus system to generally jolly up the troops - to motivate them to strive for higher efficiency and productivity.
A memo is sent out or perhaps even a staff meeting called. The boss makes it plain. "If we increase our profit," he says, "there will be something extra in your pay packets".
Now, he might even repeat this six or seven times just to make sure that all concerned understand quite clearly that an increase in profit is a pre-requisite to a bonus.
He might also repeat six or seven times that the bonus should not be regarded as a right, obligation or by any stretch of the imagination be considered an ongoing commitment by the company.
So far so good. But the mistake nine out of ten companies make is that from then on nobody mentions the word bonus again.
Years go by and everyone happily beavers away. Until tough times arrive and profits decrease or disappear completely.
The board decides that no bonuses will be paid, employees open their pay packets expecting to see the usual seasonal fillip and then throw their toys right left and centre when it isn't there.
And the reason is that unless workers are constantly reminded of the conditions surrounding bonus payouts, they will come to expect them.
On the verge of striking
I saw this happen at a multi-national in Midrand that had paid quarterly bonuses for five years on the trot. Then the day arrived when profits took a knock and bonuses weren't paid.
Employees were on the verge of striking and nothing management could say or do seemed to help. Workers had come to rely on the fact that every quarter their pay packets would be fuller and they wittingly or unwittingly committed the extra cash in advance. When it wasn't there most found themselves up the creek without any way of paddling through their predicament.
What was intended to be something that would motivate, turned out to rip the throat out of what motivation there was on the shop floor. It took months to restore the status quo.
Even worse, was a few years before when the same company had a humdinger of a year and in its wisdom decided to complement the four quarterly bonuses with a fifth special bonus when the workers came back from their Christmas break.
The board decided to make it a surprise. That, they thought, would really motivate their workers who would be so delighted they would raise the levels of efficiency and productivity to records heights.
Quite the opposite. They went on strike for three days!
Working against you
Why? Simply because for the majority of workers the extra bonus coming at that time of the year - coupled with the four quarterly bonus payouts - had the effect of pushing them all into a higher tax bracket with the result that by some quirk of taxation they either ended up with practically no increase or, in fact, got less than they would have had without the bonus.
They were furious and quite unprepared to accept that it was a tax problem and not the company that was screwing them out of their hard-earned cash.
Problem was the pay office didn?t bother to warn human resources of the potential problem.
So, it wouldn't be a bad idea, not to mention sound business strategy, for companies to make sure that every time a bonus is paid out, employees are reminded of what it is all about.
And even more importantly, whenever a bonus is not paid, that as far in advance as possible the reasons are communicated clearly and repeatedly.
Because right now in the majority of companies in South Africa, bonus systems are working against the business and not for it.
Send your comments to Chris.
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