Q: What sort of bonuses should we pay?
A. "It’s not about the money."
Usually, when people say this, they are lying.
Except, it turns out, at work.
Money, it’s been shown time and time again, is a demotivator. I’m not talking about a fair or even generous salary. Being a cheapskate is no way to find a great employee. But once people have joined your team, incremental money–bonuses and the like–usually demotivate people. They demotivate because sooner or later, people feel as though they’re being treated unfairly.
One guy gets a $10 bonus. The person sitting next to him seethes for weeks, while the bonusee forgets it soon enough.
A sales rep gets into a fight about a commission… and remembers it long after the moment is gone.
People who really and truly love their jobs are in every single industry. And people who do great work because they love their jobs are paid at every salary level. What they have in common is a boss that gives them respect and freedom and responsibility. A boss that listens when they have something to say. Which, not coincidentally, is exactly the way the best companies treat their customers, too.
Cutting your prices doesn’t build customer loyalty, and paying a bonus doesn’t build employee loyalty.
If I had money to spend on a bonus, Mr. question writer, I would invest it in allowing each of my employees to try a small project (Google style) with no strings attached. Giving fairly-paid people your trust and the freedom to grow is worth a lot more than $50.
[n.b. all bets are off when the topic is sharp-edged salespeople. Just as some stores (woot, for example) work hard to attract the money-focused shopper, there are some jobs where a razor-sharp commission structure is exactly what your people–and you–want.]