End-of-year bonuses: good news or a lump of coal?

Photo credit: Rhonda/Flickr.

It’s that time of the year again. Whether you celebrate Christmas or not, December is an important period for all. It’s time for the end-of-year celebrations and festivities – paradoxically, a good number of us also see the arrival of this season with anxiety.

Companies are closing their annual reports and preparing budgets for the next year. Employees are looking back at their achievements and hoping their bonuses will be up to their expectations. Managers wonder how they will be able to get the right messaging to their teams to motivate them for the coming year despite the inevitable doubts some of them will have regarding their bonuses.

The grinch

Don’t be the grinch that stole Christmas. Photo credit: Michael Bentley/Flickr.

The large majority of companies still extensively use annual performance reviews to “reward” and “motivate,” although the method has long been proved to be unproductive. Unfortunately, whereas the objective behind those annual review models is to boost performance and reward employees, the reality is that only a small portion of employees will get something up to their expectations.

The truth: besides the happy few who will benefit from the model and feel strongly valued by the company, the majority of the employees will at best think they just get what is owed to them, or feel frustrated and betrayed.

Neuroscience research shows that conversations about compensation provoke an almost primordial “fight or flight” reaction among employees.

Neuroscience research shows that conversations about compensation provoke an almost primordial “fight or flight” reaction among employees, which obviously inhibits any productive effect of the feedback or coaching process. In his article “Managing with the brain in mind,” researcher David Rock writes:

Leaders often underestimate the importance of addressing threats to fairness. This is especially true when it comes to compensation. In organizations, the perception of unfairness creates an environment in which trust and collaboration cannot flourish.

Saving Christmas

If your company is one of the many still using annual performance reviews, these tips will help managers get the right message about annual bonuses and promotions – without spoiling morales for the end of the year.

1. Keep it short and objective.

• Be respectful. Meet all your direct reports face-to-face to announce the annual bonus and salary decisions. Receiving this over email is not good practice, and shows poor respect for employees.

Want to try a Grinch-free Christmas?