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By Introducing Bonus Systems to Reward Employees, Do Companies Achieve Superior Business Performance? (Report Date: January 2003, Full Report: 19 pages) Summary This report analyses whether bonuses work towards creating greater work productivity and efficiency, and therefore superior business results. It discusses the potential advantages and disadvantages of introducing bonus schemes in companies, and provides recommendations on how to develop effective bonus programmes. In today’s rapidly changing business climate, there is a growing focus on finding efficient ways of recruiting and retaining the best people to maximise productivity and to counter the high costs of replacing the employees that leave. Organisations now recognise that employee loyalties are directly linked to the amount of money earned, and that bonuses can be an effective management tool to attract new employees and to encourage them to stay in the company. However, bonuses alone are not enough to attract and retain employees and to enhance business performance. Furthermore, many bonus schemes are either poorly designed and communicated, or they are based on flawed assumptions, and other factors that are equally if not more important in attracting and retaining employees are being neglected. This does not mean that bonuses should be written off, but the way in which they are administered should be improved and the right conditions should be in place before they are implemented. Bonus systems should be aligned with organisational goals and should be tailored to meet the specific needs and requirements of the company. This report reviews the pros of cons of bonus programmes and describes the key steps that organisations need to take to maximise the effectiveness of their bonus schemes.
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