Salary and Bonus: What Are They For?

“I worked hard this year!  I deserve a bigger bonus!”  I heard this complaint almost annually in 15 years in various sales leadership positions.  Sometimes it was a valid complaint.  Most of the time it wasn’t.

I like people who are competitive and driven to win.  In sales, I looked for those traits in everyone I hired.  Unfortunately, I found that drive often gave people an unrealistic perception of what they deserved.

“You receive a salary for effort.  You get a raise and/or bonuses for results.”

For Effort Or For Results?

Effort Only

Too many people collecting a salary in sales or in other positions, believe that because they tried, they deserve a raise or a bonus.  The belief seems to be that showing up consistently and meeting standards (a.k.a.  minimums) warrants rewards.

Maybe this starts in childhood.  I explored this in:  American Idol- Youth Sports and Self-Esteem.  I think receiving a trophy for just showing up as a kid has now affected our adult workforce.

Rewards are not a right.  Most employment contracts promise people salaries.  Salaries are for showing up and trying.  The raises and the bonuses are reserved for the people who put the ball in the net.  In other words, raises and bonuses are about results.

It’s About Results

If I want a raise, I should earn it by making my company better.  Did I beat my quota?  Did I save the company money on a project?  Did I develop a process that has changed how we do business?

If I am just plodding along, day in and day out without moving my organization closer to it’s goals, my current salary is my reward.  If the results I achieved this year meet but do not exceed the standards of performance set for me, I should be shocked to get a bonus.

If I expect something beyond my current salary, I need to exceed performance expectations.  Paying people more and more for achieving the same thing they did last year is a recipe for mediocrity and eventual failure in any business.

Changing Attitudes

I know of companies who claim to be results oriented, but consistently give raises – beyond cost of living increases – to average performers.  Some deliver bonuses more out of fear of conflict with average performers than for actual results.  This fosters an attitude in an organization very similar to participation trophies for youth sports.

In these cases the organization is to blame for these attitudes.  In other cases, the individuals are the issue.

As an individual, I have certain rights guaranteed to me in the Constitution.  I am not expert in the law, but I do not think raises and bonuses were ever written into that document by our founding fathers.

If my raise is not what I wished for, or my bonus is less than what I promised my wife, I need to get busy figuring out what I am going to due this year to insure history does not repeat itself.

Book Recommendation

Daniel Pink’s book, Drive:  The Surprising Truth About What Motivates Us changed my mind about the use of bonuses to motivate people.  I recommend it to anyone looking for new ways to motivate a team.

Warning, this book runs counter to what most business people believe about using incentives to motivate people.  But, it is well documented and should be taken seriously.

Some people are proponents of salary and bonus together.  Some are proponents of commission only structures.  No matter what you believe in, I recommend you read Drive.

The Bottom Line:

“You receive a salary for effort.  You get a raise and/or bonuses for results.”

If I want more, I need to produce more.  The responsibility is on my shoulders.  I must earn my raise.  I must earn my bonus.  If I don’t, I should at least be grateful my company decided to pay me my salary one more year and give me the opportunity to improve my results.

Question:

Have you ever heard anyone admit they didn’t deserve a raise or a bonus?

2 Responses to “Salary and Bonus: What Are They For?”

  1. Michelle Nash March 2, 2013 at 1:30 pm #

    Thanks Dave for writing this! It is that time of the year when we are conducting performance appraisals at my company. What an appropriate article at the appropriate time.

    I will share it with my team to provide clarity and help them focus on what they will do to exceed expectations in 2013.

    • Dave Anderson March 4, 2013 at 5:29 am #

      I always spent 80% of the review time looking forward and 20% looking backward.

      I felt if I had done my job the entire year, the review was just a recap. No surprises.

      Good luck!