Should you pay your staff bonuses?

After finding a study on the impact of bonuses on staff output, Ian Cowley investigated how incentives worked for his business.

It’s a time-honoured tradition. But are bonuses still an effective way to reward your staff these days.

We weren’t so sure, despite investing in ‘gifts’ over the last few years. So we investigated a little further, with some interesting results! Here’s a quick summary to help you as you make a final call.

What the scientist says

Stats in black and white always make for a good starting point and the Massachusetts Institute of Technology (MIT) didn’t let us down.

In 2008 they compiled a comprehensive and opinion-changing study to assess the impact of bonuses. They asked participants to take part in a number of mental and physical challenges and analysed their output in relation to the bonus on offer: small, medium or large.

They discovered that while bonuses raised the output of mechanical tasks such as factory packing, it had minimal motivation value on creative tasks. And since creative tasks represent the bulk of our workforce, it made a bonus structure irrelevant.

Theory into practice

MIT got us thinking. But how did theory work in practice? We tested it in-house, taking away the bonus structure we currently had in place.

Firstly, there was so mass riot. Phew.

Secondly, most importantly, there was no impact on the rate bonuses were being hit. Targets that were being hit continued to be hit and the ones which were being missed were still being missed.

The KPI conundrum

It became apparent that the issue was not our employees’ application but the KPIs being set. They weren’t achievable. 

For example, abandoned call rate. It became clear that we didn’t have enough staff to cope with demand. Therefore incentivising wouldn’t work – the only solution was more staff.

The team was understaffed making the target impossible to reach. Which in turn meant the bonus was actually demotivational – a carrot was being dangled with no chance of having a bite.

So if you don’t give bonuses, how do you reward?

It is clear that our employees take pride in their work – and I don’t think this is unique to us. Unless you’re doing something incredibly wrong, all staff want to do the best job they possibly can, as long as they are being paid properly and consistently throughout the year. As long as staff feel that they are being paid enough not to worry about money, they will concentrate on the job in hand.

And the icing on the cake? Just saying ‘thank you’ will go a long way. Job satisfaction is very important, especially at an age where we spend more time in the office than ever before. If you recognise their contribution, they will continue to be motivated.

Further reading on staff incentives

Ian Cowley

Filomena Walker

Ian Cowley is managing director of

Related Topics

Managing Staff

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