The bonus scheme bogus On what basis do you establish a bonus scheme, asks Tony Phillips, who argues that such incentives are not necessarily the best method of rewarding hard work

31 August, 2007
Page 13 
Never have I been able to understand or formulate a good bonus scheme.
The more I have looked at the problem, the more convinced I become that they are simply not an efficient means of rewarding an employee or encouraging them to greater effort.supporting a hypothesisWhenever I talk to people operating a bonus scheme, it does not fill me with confidence that they are satisfied with their system. It's as if they are trying to support a hypothesis, rather than find evidence against it.Bonus schemes, as used by big business and government agencies, are virtually always an out-and-out swindle - just a hidden way to give the recipients a sly pay increase, which they do not deserve.In our real world, let us at least be honest with each other; often we lose sales without any real errors on our part and due, perhaps, to reasons beyond our control - such as non-stop rain, the moving of a bus stop or useless double lines that stop our custo-mers parking and popping into our shops for a quick snack.Whenever this happens to us, we start looking for our own failings, as indeed we should, but often it is out of our control. So the potential recipient of the bonus loses out and becomes disgruntled.EPHEMERAL INCREASETwo years ago, I wrote that our retail stores were increasing between 10% and 30%, for no reason we were aware of. I said it would not last and it did not, as we ended up with about a 10-12% increase by the end of the year.Now, if we had had a bonus system in place, we would have paid out for nothing, and that's my problem: how do we decide whether the extra profit is due to an individual's performance or, as is more common, a team effort - plus at times for no reason or credit to ourselves. It just happens. Perhaps I could paraphrase John Kennedy and say to our staff: "Think not what your company can do for you, but what you can do for your company."BASIS FOR THE BONUSIf you award bonuses based on increased turnover or profitability - say inflation is 10% and sales increase by 10% - who deserves the reward? And of course, it's easy to inflate sales at the expense of profits.So the answer must be profit? No, go easy, the company may have negotiated a reduction on electricity, the telephone, gas or just plain property tax charges, without any intervention of the bonus recipient. Or the company might have lashed out a great deal of money on new fuel efficiency equipment. In my case, that would be my money and decision, not a manager's decision.So after all this chat, we appear to be where we started, with no clear answer.Maybe the problem is insoluble - a bit like trying to convince my wife, Barbara, that, when I give her a new cheque book, it is not like a good book, which she cannot put down until she has finished it. n

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