Situation: A company has lost six people since the beginning of year – about 7% of employees. Currently the company doesn’t pay bonuses but increases salaries annually. The CEO has been considering creating a bonus pool, distributed based on performance points earned during the year, and including a component for employee longevity. How does your company award bonuses?
Advice from the CEOs:
- There is fierce completion for good software engineers. You will lose people unless you focus on culture and pay bonuses of some sort.
- Based on reasons that people left you need to start developing and enhancing your company culture.
- Don’t kid yourself. You already have a company culture. Hire a consultant to help you identify it so that you are developing it along lines that you desire instead of by accident.
- Make it clear that bonuses are not entitlements but are earned. There should be clear guidance as to bonus criteria.
- Check out the following YouTube – “RSA Animate – The surprising truth about what motivates us” to see what motivates knowledge workers who are expected to develop creative solutions. The bottom line is that it is more than money!
- An effective bonus program must have a bias toward performance – the metric is key. Be careful about the way you create metrics and incentives and be wary of unintended consequences.
- Pay special attention to the quality and skills of your 1st and 2nd line managers.
- Besides bonus, equity and culture – plan for 10% attrition. In your industry, this may be the norm.