Year-end bonuses:  incentive or entitlement?

Nov 15, 2016 by Edward L. Blach, DVM, MS, MBA

A frequent question from practice owners and managers is whether year-end bonuses provide effective motivation or are a detrimental entitlement?  The fact that the question is typically worded exactly in that manner indicates how owners and managers view year-end bonuses.  The 'entitlement' word indicates that practice owners don't see 'bonuses for all' as a motivator that yields positive results.  Instead, if every employee receives a bonus, it is often veiwed as a demotivator to those who are the biggest contributors to productivity in the business.  

What is recommended?  If the practice and practice owner wishes to give gifts in the form of money, then call it a gift instead of a bonus.  A bonus should be compensation that recognizes exemplary service and productivity that helps the business perform at or beyond the stated objectives of the practice.  A gift is made regardless of performance.

To build successful bonus programs, keep it simple.  Identify with your team company objectives that can be measured and which, if achieved, will generate significant financial results for the practice.  Allocate a portion of those added profits to a bonus program to be allocated to employees who help to achieve the desired results.  Lastly, issue the bonuses at the time of the achievement, rather than at the end of the year.  This process will help to align incentives of employees with those of the company and by issuing them when goals are achieved, they will serve as rewards directly tied to the desired achievements.  In addition, this process will help you to identify your rock star employees, as they will be those who help you to achieve the desired, measurable results.

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