Some employers prefer to get rid of individual bonuses in favour of a collective bonus or fixed pay rise. Some of them have told us the reasons for these decisions and explained the consequence of such changes. However, is getting rid of the individual bonus really the right answer? This article will try to find some answers.
Getting rid of individual bonuses: reasons and alternatives
Commercial pressures, lack of solidarity between team members, communication and skill transfer issues; all of these reasons have been raised by businesses who have given up on individual incentive compensation. These employers have told us about their preference for collective incentive compensation or basic pay rises over bonuses keyed to personal objectives.
Lucca, the basic pay rise and career accelerator option
Lucca, a publisher specialised in HR process automation has decided to simply give up on incentive compensation. Mathieu Nivois, chief sales officer, told us how, after a year of sales staff benefiting from collective incentive compensation, they decided to integrate the variable portion into the base salary. This radical decision was motivated by a lack of motivation in sales staff combined with high levels of stress and disappointing results.
The company places a very high importance on the transfer of knowledge between experienced staff members and young recruits and fear that the pressure associated with the individual bonus system hindered the former from taking on this coaching role for junior staff members. At Lucca, individual incentive compensation has now been replaced by a higher base salary and combined with career accelerators to take them more rapidly to higher pay scales.
Nomination, a preference for the collective bonus
Nomination, the B2B prospection platform also decided to do away with individual bonuses. Here team solidarity and cohesion are also essential factors for this company and salaries need to encourage this. Lyes Tebbi, head of sales for Nomination, explains that they preferred to bring in a collective bonus scheme. That way all staff can be rewarded for the company’s overall performance.
This significantly increased solidarity generated greater sales staff motivation and commitment, encouraging the team to achieve, or even exceed, its fixed objectives. The transmission of know-how between the more experienced employees and junior recruits was also accelerated and team cohesion has been strengthened, says Lyes Tebbi.
Collective bonus and incentive compensation: a question of equilibrium
If some employers have completely done away with individual incentive compensation, it is important to look at the methods used in its implementation. Was the incentive compensation sufficiently thought through and constructed on the basis of pertinent KPIs? Regardless of whether we are talking about individual incentive compensation or collective incentive compensation, for one or the other to function and be a source of motivation and performance, they need to be calibrated wisely and precisely.
Collective bonuses are ok but they have to be pertinent
Before replacing an individual bonus with a collective bonus, it is important to bear in mind that there could be a lack of equality between the company’s employees. Switching to collective will only be pertinent if there is a real need to generate collaborative behaviour. This is often the case in retail. In fact sales assistants need to agree on how they manage customer relations. In this sector, results based on the shop’s objectives are essential and therefore collective. However, the collective bonus must be based on the individual contribution of each employee.
Collective bonuses can turn out to be very pertinent if they are calibrated to generate general skills and strengthen communication between team members and therefore achieve greater general cohesion. However, it is important to return to an individual bonus to differentiate between the productive employees and those that are less invested in achieving the shared objective. On the contrary, there is the risk of placing the group’s success on the shoulders of only a few employees, with the added danger of not actually meeting the set objective. And this can create unequal pay between different members of the group.
Badly designed and thought out incentive compensation will be counter-productive
Regardless of whether it is individual or collective, incentive compensation can be a powerful driving force for greater motivation and performance or, on the other hand, a source of unnecessary pressure and hindered productivity. The difficulties raised by incentive compensation generally come from failures in the definition of performance objectives.
When the incentive compensation scheme does not make use of levers that are available to employees, is based on the wrong performance indicators or fails to allow for the company’s global strategy or employee profiles, the bonus system can only lead to failure for the employee and a total loss of commitment.
Selecting the right KPIs, making sure that the employee has all the tools they need to complete their mission and situate performance objectives in the larger context of company productivity and employee career path will contribute to constructing an effective incentive compensation scheme. Incentive compensation is a genuine investment for the employer: by basing it on a coherent and pertinent structure, they provide their staff with an unbeatable motivational lever that will boost company growth.
Before completely doing away with individual bonuses or deciding to completely overhaul the incentive compensation system, it is important to get an understanding of the failings that are affecting the existing mechanism. It will always be possible to adjust the bonus scheme or focus on other incentive compensation solutions. The main thing for the employer is to maintain their long-term vision when they put together their employee compensation scheme.
