How to give fair and accurate staff bonuses

Do you get a stress headache every December when it’s staff bonus season? Here are a few tips on how to give fair and accurate staff bonuses this month.

It’s that time of year again – the one time in the year where business owners find themselves perplexed and employees are joyful. It’s annual bonus time. This is a precarious time of year for business owners. If bonuses are handled poorly, or perceived to be unfair, the fallout can be considerable:

  • A wildly discontented team
  • A toxic work environment
  • Even increased resignations.

It could make for a very unmerry Christmas and New Year for all.

How to handle staff bonuses in a fair and accurate way

1. SMART goals

SMART was coined by George Doran in 1981, so it’s not an entirely new concept. However, it is proven and reliable. SMART is often used to set goals at the start of the year, but it can also be used to check how reasonable and measurable the targets are for your team, and can help determine what your bonuses will reward.

The original SMART goal acronym stands for: Specific, Measurable, Assignable, Realistic and Time related.

Here are a few variations of the acronym that provide a more holistic definition for goal-setting. Select which variations best suit your team, your goals and objectives.

S – Specific, Significant, Stretching

  • Is the goal well-defined? The goal should be so clear that someone with even the most basic knowledge of the project can understand it.
  • Does the goal offer a challenge for the individual to rise to and meet?

M-Measurable, Meaningful, Motivational

  • A goal is one that can be measured – if it cannot be measured, it is not a goal, it is part of the vision.
  • A meaningful goal is powerful, as it inspires team buy-in and internal motivation, and significantly increases the potential to reach that goal.

A-Agreed upon, Attainable, Achievable, Acceptable, Action-oriented

  • Is there an agreement with all the stakeholders about what the goals should be?
  • Can the team achieve this goal with the resources that are available?
  • Is the goal action- or task-based? Task assignment to team members improves accountability and the chances of task completion.

R-Realistic, Relevant, Reasonable, Rewarding, Results-oriented

  • Is it a realistic goal within the availability of resources, knowledge and time?
  • How relevant is the goal to the individual’s profile, and the team’s role?
  • What are the desired results of this goal?

T-Time-based, Tangible, Trackable

  • It is important that the goal have a start and end date.
  • Is there enough time to achieve the goal? Note, if there is too much time, it can negatively affect project performance.
  • Can the steps to reach the goal be articulated and tracked?

2. Consistent management

Once you have set these goals and the team understands what performance is required of them, it is important to create the weekly rhythm of meeting with your team to assess progress. This regular meeting is as necessary for you as it is for them.

Not only does it allow you to make slight tweaks to their performances throughout the year in order to set them up for success come year-end bonus time, but it also builds strong relationships. This is important if the business finds it cannot afford full bonuses in December. The team will know you have supported them throughout the year, and it is not taken as a personal affront or as a show of indifference to their efforts.

3. System support

To be honest, when reviewing staff performance, we usually only remember the most recent stuff-up or success. We forget, or don’t even recognise, the hundreds of other daily things the team is doing that is on time, in-line with policies and procedures, and within the parameters of what they need to do to keep the business going.

For an unemotional, unbiased review of performance across the year, lean on your business operating systems and management information systems. Good systems provide an immediate view of daily, weekly, monthly and annual staff performance against targets, and makes decision-making easier.