November 27, 2012

It Is Time To Plan Your Holiday Bonuses

By Paul Bieber

If you made a couple of bucks in the past twelve months, now is the time to plan sharing part of that with your employees. In just about every business wages have been cut or held without a raise, overtime has stopped, and benefits reduced. Now may be the time to give a little bit back to the people who helped your company make those bucks. 

There is a very important business axiom you should keep in mind:  “The most important assets of your company walk out the door every night.”  Yes, you sincerely thank them, and recognition is usually more important than cash; but at this time of year, everyone thinks about a holiday/Christmas gift from the boss.

If this is strictly a gift, give everyone the same amount.  Nothing more to say.  But if you give different people differing amounts, then this is a reward for their productivity during the year.  And this gives you plenty of opportunities to hit a home run with your employees.  Giving a larger gift to those that have performed better is the way to go, but requires more work and effort and your part.  Why did Mary get more than Bill?  How do you measure contribution to your company’s goals?

A valid employee evaluation is the starting point.  If you don’t have one, consider starting one for the coming year.  Evaluations help in many ways, including helping employees grow and be more productive, as well as protecting you in certain legal situations.  But, back to the holiday gift.  The folks that score higher on their evaluations should get a bigger share of the pie.

Let’s look at Mary and Bill.  Mary works hard, comes in early, stays late when requested, trains others and always goes out of her way to help customers.  Bill, on the other hand, works exactly eight hours, is generally considered grumpy and you often wonder why he works here.  They have both been with you for two years.  If you give each the same gift, what is Mary’s incentive to work harder?  Bill thinks he doesn’t have to work harder, and he doesn’t.  If you give all employees the same gift, you will surely turn your workforce towards the lowest common denominator, for the good employees will leave you to work some place they are more appreciated. 

How do you do this?  Set a budget that you can spend on holiday gifts.  Be sure to add your overhead costs, like the employer portion of FICA and/or pension costs.  Give 70% of the budget to the top 30% of your employees.  Thank them with both your words and your actions.  For the 70% of the employees who don’t get the big bucks, explain to each one why they are not getting a higher bonus and what they can do to earn more next year.  Give some specific instances, with Bill in this case, where he could have done more to help the company.  Don’t tell him that Mary earned more because of this or that.  Stick strictly to Bill’s work efforts, motivating him to do better next year. 

Now, if you are giving gifts based on merit, where in the past it was helter-skelter or seniority, announce this early next year.  People come to expect a certain amount and will be upset when they hear they may get a different amount.  Actually, only the under-performers will be upset.  The hard workers will be pleased.  You don’t want to manage your business to keep the lower tier of employees happy…you want to reward your top-tier  folks, and that will reward your business.

Be careful to consider an employee’s full year of work.  You may be remembering a single event in November, either good or bad, and let that influence your decision.  Also, if you are displeased with a certain department or shift, it is usually not the employee’s fault.  Look to the leadership of that group when deciding on holiday bonuses. 

America’s work force is changing.  To some it is a Christmas bonus, to others it may be another holiday.  Call it whatever you want, but be sensitive to your work force. 

We had an employee who received a smaller check for his bonus.  When he opened it up, his face got red and he threw the check back at me, stating, “If that is all you can afford to give me, then you keep it.”  Well, I did, and a couple of weeks later was pleased that he left us.  In fact, his replacement was just super as an employee, and he got a good bonus the following year!