How to Motivate Employees With a Bonus Program

Last Updated March 13, 2020

Motivation and morale are two things that companies should strive to establish and maintain within their organization. Employers who neglect to boost morale and ensure contentment in their workforce have a higher potential of losing valued employees as the economy improves. As more jobs become available, unsatisfied and unmotivated employees may seek roles at other companies with a more satisfying culture and a higher morale rate.

Many companies have improved employee satisfaction by implementing employee bonus programs that can be aimed at generating new business, creating a win-win situation for the employee and the business. Paul Gavejian, managing director of Total Compensation Solutions, said he has seen more companies use this strategy as they look to decrease fixed costs.

“By motivating their professional staff and managers to modify their behavior in some way – do more sales calls, increase hours worked, generate more news and strategies, achieve higher profit, or reduce operating costs – then a company can increase revenues and profits,” he said to Entrepreneur.com.

In order to create and implement a successful bonus program, companies must first determine what they want to achieve, and then structure the program around those goals.

Here are a few guidelines for bonus program strategies:

Focus on profitability – According to small-business expert Donald Mazzella, the most sensible small-business bonus program ties into increased profitability. This rewards employees for assisting in the improvement of the bottom line. Resulting profits can be used for funding the bonuses. Struggling companies can still implement this tactic, stating that if the company does not profit, employees may not receive bonuses.

Offer a share of increased sales – Companies may also decide to give employees a percentage or fixed dollar amount when sales improve over previous periods. For example, a Midwestern clothing business that Mazzella worked with, told employees it would contribute 20% to its bonus pool if they maintained its previous year’s sales level.

Share new ideas – Businesses can also award a certain percentage or dollar amount to employees who develop an improvement that can result in a profit improvement. While the company assumes the risk in this case, it also limits the cost of developing and creating a new product or service.

Long-time entrepreneur and business leader Gary Brose, known for his passion for creating great bonus programs, describes the following eight characteristics of effective bonus programs:

Gradiated – Create multiple levels so workers can continuously strive for new goals when other goals are met.

Equitable – Make company-wide programs identical, eliminating potential rivalries between departments.

Timely – Vary bonus frequency according to seniority. Low-level employees should receive bonuses in each paycheck, mid-level managers on a quarterly basis and senior executives annually.

Simple – Programs should be easily explained and understood by all stakeholders.

Meaningful – Requirements should fall within the employees’ abilities and the amount should be substantial enough to motivate them.

Objective – Bonuses must be based on measurable results instead of subjective opinions.

Reinforced – Progress against goals should be frequently documented and shared.

Easy – Lower-level bonuses should be easily attainable so each employee experiences reward and is motivated to achieve higher goals.

Implementing an employee bonus program focused on improving company profitability can be a great way to improve the company bottom line while boosting internal employee satisfaction and morale. HR professionals can assist in the development and implementation of these programs, playing an important part in building a company’s market share while strengthening employee loyalty.