Why You Should Give Frequent Small Bonuses

Take a look at pretty much any employee morale survey, and you’ll notice (perhaps to the surprise of many) that money doesn’t top the list of requests. The things that do tend to come in at the top of such lists—appreciation, respect, freedom, access to resources, flexibility, creativity, etc.—are the types of self-esteem and self-actualization needs that would make Abraham Maslow smile.

At the same time, money also has a tendency to show up at the top of lists of employee stressors, irrespective of actual compensation, demographics, or other factors. So the state of affairs is such that more money is unlikely to increase morale, but it is likely to decrease stress. What’s going on?

The fact of the matter is that all too many people are terrible with their money. Whether they make $20,000/year or $200,000/year, they often fail to make a budget, overspend their budget, or aren’t saving as much as they could or should for emergencies, educations, or retirement.

Worse still, financial stress can be enough of a burden to interfere with employee performances, and attempts to offer advice or financial coaching can be seen as meddlesome, presumptuous, or even rude. 

Many organizations respond—sometimes deliberately, sometimes out of compassion, and sometimes simply because it’s grown to be an expectation—with large bonuses on regular schedules: Perhaps $500 for an end-of-quarter bonus, $1000 for a holiday bonus, or $100 for a year-end bonus. But these don’t even begin to approach the root of either problem. 

If the problem is morale, money shouldn’t be expected to help much, especially if it comes in like clockwork. Before long, bonuses become entitlements, or even gifts. If the problem is financial stress, money on a schedule isn’t much help either—people quickly grow dependent on it, and the problem continues unless the amounts keep growing. 

Instead, try to award bonuses irregularly, in small amounts, in direct response to strong performances. How often do you say things like “Great presentation today Martha, you’ll notice that your next paycheck will be a little bit higher than usual” or “I’m in such a great mood, because I can tell how hard you’ve all been working. So the company has deposited $50 directly into each of your bank accounts. Treat yo self.” How often could you say such things? $100 here or there can make a big difference.

Frequent small bonuses are an effective reward—whether they’re $100 or $1000—because they also serve as recognition. People crave recognition. By contrast, large, infrequent, scheduled bonuses are always expected and quickly forgotten. They don’t recognize performances, they don’t boost morale, they can’t decrease financial stress, and they aren’t effective forms of motivation.

That’s the trick to bonuses. They need to be a bonus.

Of course, there are risks to frequent small bonuses too. A sudden shift away from large scheduled bonuses can actually increase people’s financial difficulties. If they’re not deployed properly, employee perceptions of favoritism can cause problems quickly, and managers may even (hopefully unknowingly) discriminate against protected groups.

Ultimately, like so many things in your business, frequent small bonuses come down to managing expectations. When employees aren’t expecting a bonus, the impact is much more meaningful, it’s easier to deploy the program equitably, and you can use it to boost morale, reduce turnover, and decrease financial stress.

It’s win/win/win.

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