More than half of for-profit employers pay out some sort of “year-end bonus” – sometimes it’s called incentive, profit-sharing, distribution, bonus checks.

I heard two examples this month of employees who were actually disappointed/ mad after receiving a fairly generous bonus!

Many well-meaning employers have one of these “plans” but there are two key problems that indicate you should re-design the plan:

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For most small employers and a surprising number of large ones, it is also a mystery to employees how they “earned” it and how they can get a bigger one next year. Your employee is thinking something along the lines of “thanks for the $500, what is it for?”

If you are going to spend money – cold hard-earned profits- I suspect you want to get some “bang for your buck.”

If your employees do not understand these three things, it’s time for a re-design:

  • why they received $x in annual incentive,
  • how it ties to either their and/or the company performance, and
  • what they can specifically do next year to make this incentive larger

2. Becomes an “entitlement”

I have yet to meet an employee who will turn this down but often employees are actually MAD or disappointed when they get their bonus check.

Can you believe it!? An owner or manager group could take all the profits for themselves, yet they choose to share some with the staff. Instead of feelings of gratitude and joy, a poorly designed or communicated plan actually has the opposite effect.

And these feelings can linger and fester and actually lower the commitment and enthusiasm of your staff.
Yikes! A client recently used the phrase that sums this up: “we don’t need to spend money to piss people off!”

Typically the reason employees are actually dissatisfied with the bonus amount is because they expected more (for whatever reason) or think their amount is “unfair.”

Perhaps they thought they would get the same as last year (entitlement thinking) but profits were down so the overall pool was less. Or they thought that the promotion to manager would earn a bigger bonus. Or I should earn more than Larry because (fill in reason here.)

If you are hearing grumblings or outright complaints, it’s time for a re-design. Sometimes the plan is effective but it needs to be better communicated to shape employee expectations,  explain the equity in method, and align performance with the payout.

The solution to bonus pains: Our model is to leverage the three  3C’s necessary to have a successful performance-based incentive plan- under employee’s Control, not Complex, clearly Communicated for alignment to company goals.

We have a ten step process to make sure your plan shows what is important to achieve, how each person contributes, and how they can be rewarded.

If you are interested in getting more bang for your incentive buck next year, I’m happy to chat- click here to book a phone session

Image courtesy of Stuart Miles at