BONUSES CAN BACKFIRE

GROUP 5
ABHISHEK MURARKA
GARIMA ASTHA
SHREYA TIWARI
VADANT DAGA
KRISHNA PHRIYA M
PRIYANSHU JAIN
PRATYUSH PEDDIREDDI

Bonuses a brief overview

A pay plan that rewards recent performance rather than historical

performance

Significant component of total compensation

- Among Fortune 100 CEOs bonus exceeds base salary

Bonuses are generally a positive strategy and can provide real motivation

Serve to increase employees' identification with a company

Most common form of a bonus scheme is straight forward profit-sharing

Some Common Myths

MYTH 1 : Bonuses are necessary incentives

MYTH 2 : More is always better

MYTH 3 : Bonuses increase performance

MYTH 4 : Bonuses should be individual focused

We find that financial incentives may

indeed reduce intrinsic motivation and
diminish ethical or other reasons for
complying with workplace social norms
such as fairness.
- London School of Economics

NEGLECT
QUALITY

IGNORE LONG TERM

PROFITABILITY AND
SURVIVAL

SHORTEST ROUTE

LEADS TO ILLEGAL
AND UNETHICAL
BEHAVIOUR

Bonuses should be given regularly

or not

Bonuses can motivate people

But theres growing evidence bonuses can backfire

Misalignment between what people do and their underlying purpose

Can lead to undesirable behavior

Contd

Behaviors would be driven by the reward systems

Foster competition between employees rather than collaboration

Unrealistic Expectations

Taxation of Bonuses

A situation in my
life when being
evaluated and
rewarded on a
specific goal lead
to negative and
unproductive
behavior

Individual Bonus vs. Team Bonus

Depends upon nature of work

Individual Bonus

Team Bonus

If job involves:

If job requires:

Individual work

Sharing information

No focus on sharing

Sharing resources

No need for
collaboration

Supporting/helping
colleagues

Possible Consequences
Incentive to insulate
oneself

Slackers-freeriding

Detriment to team
spirit

Reward disproportional
to input

Contd

Hybrid:

Two-thirds incentive to individual performance, one-third to overall

team output.

Prevents slacking-individual targets

Keeps team goal/big picture in mind.

Retains focus on healthy work environment

Incentivises helping/guiding one another

How should a manager design a reward system

to avoid the problems mentioned in the case?

Model to be followed

Employee can contribute to setting goals and their needs

should be considered

Choosing their own benefits packages

At the end performance will matter and benefits will be

rewarded based on performance

Feedback mechanism

System of Equity

Conclusion

Incentives are meant to boost performance but they do sometimes result in

internal squabbles and unethical behavior

It should be ensured that bonuses do not result in deterioration of Quality

Group and Individual bonuses:

Group bonuses develop team spirit but may result in Freeriding

Individual bonuses are detrimental for team spirit but may serve as a boost for
individual performance

Incentives should be based on what is in control of the employees

Bonuses do not magically fix the performance, but is simply a mechanism for
how you measure the change

Thank you