Year-End Bonuses Aren't Effective, Says Recognition Expert
By Deanna Ting
December 5, 2012
Employee recognition expert Michael Levy argues that holiday year-end bonuses should be a thing of the past. He says that the year-end bonus is better suited to the 1840s labor pool of Dickens’ classic tale, A Christmas Carol, than the 21st-century workplace.
“The year-end bonus doesn’t impact behavior,” says Levy, president of Online Rewards
. “It’s symbolic, rather than strategic. The current generation of employees requires instant gratification for recognition to be impactful, and recognition should be tied to individual behaviors in real-time. Holiday bonuses are too far removed from the positive behaviors that are completed throughout the year to be meaningful—and they don’t relate to the actual contributions of the individual employees who are generating the outcomes.”
According to a 2011 Challenger, Gray & Christmas survey, 53 percent of U.S. businesses award holiday bonuses. Instead of annual bonuses, Levy believes that companies should reward good performance over entitlement traditions.
“Instead of a lump sum payment once a year, savvy employers are creating reward and recognition programs that recognize and reward at the time of the behavior,” says Levy. “These timely bonuses distinguish between employees based on their individual performance. They strengthen relationships between employees and managers. Year-around performance-based programs promote behavior that advances the company goals and impact employee perceptions in a significantly more real and frequent basis than annual holiday bonuses.”
The best kinds of rewards, he says, are those that are non-cash and are meaningful to the employee. “Electronics, gift cards, travel vouchers and movie passes serve better as rewards than cash because they’re indulgences the employee might not otherwise experience,” Levy says. “Cash is used to cover the day-to-day realities and responsibilities (mortgage payments, insurance, credit card bills and utilities).”
“Non-cash rewards convey a deeper message. Getting the reward just right—that’s the science of great incentive design,” Levy states.
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