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03 October 2023

Are you using bonuses to keep your employees?​

At the time of writing this, there have been several large companies announcing layoffs. Most in tech. Some entertainment companies like Disney.

The overall unemployment rate is at a low not seen for 80 years. Too early to know how these large tech layoffs will affect the unemployment rate. In general though, the talent market is tight for companies.


When this happens, employed folks start looking over the fence to see if the grass is greener. Other companies are having a cookout on the other side, inviting you to come over. You may find yourself having a conversation with a senior, longtime employee. Internally that means you are having discussions around retaining key positions.


One of the tools owners/managers have to keep employees is discretionary bonuses. Labeled as “retention” bonuses. It can be effective. It can also wreck havoc. The 20% of comp bonus just opened pandora’s box. Studies have shown that retention bonuses don’t create engagement. They do little to create loyalty. 


Here’s the thing. If your employee is looking over the fence, you have a larger problem. There may be a culture problem. A workplace conditions issue. I advise my clients to make Culture a top priority…every day of the year. I think we can agree – the cost to replace an employee is expensive. (moreso if it is a key position)


I am not saying that if you have a great, aligned culture, you won’t have people seeing what else is out there. Your director of marketing might have a sick family member and a stack of bills. Compensation will be high on their needs profile. 


This is to say if you do have folks wanting to jump the fence, it is more likely to be isolated instances. Not a movement of employees looking for something better.

I’ll try to land this plane. Otherwise I can go on and on. (I’ll save you.)


Volitile labor markets shine the light on the cracks in your culture, work conditions, and employee satisfaction. These are things that often get overlooked. Once you have a problem, they don’t help you. So…we turn to comp. Matching offers from other companies.

If your pay is below the regional average for a given role, giving a bonus does nothing but put a bandaid on the problem. At some point that bandaid falls off.


Guess who’s coming back for another?


I am not against discretionary comp. Bonus on the spot kind of things. I do think it needs to be done within a comp system that has been shared to all employees. Understand this. ALL employees talk about comp. If Johnnie gets a bonus, Suzzie expects one. You better have a system otherwise this becomes the wild west.


I am on final approach and can see the runway. I’ll end with this. Don’t be afraid to let someone go. If they are key person, it’s going to suck. Maybe a lot. But, your employees learn that you will not prevent someone from doing what’s best for them. The other subtle message that comes across that the company does not bend to everything under the sun.


Pay fairly. Have a positive culture that makes it difficult for employees to see them somewhere else. Be transparent and create opportunities for your employees. You’ll thank me in a few years.


If you'd like to talk to Brad about coaching, click here to set up a call.


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