February 19, 2007

The Bonus vs. Basic Human Nature

Sam Stanley was stupefied. The poor guy just couldn’t seem to get the employees of his advertising agency to produce to his satisfaction.

“I don’t get it, D.F. I just can’t light a fire under them.”

I had a few theories. Sam tends to scare the bejeezus out of his employees by running through the halls like he’s in a panic because the agency could go out of business at any minute. He tends to get flustered by exceedingly challenging questions like, “What do you think we should do?”

These habits tend to make it hard to get your employees to run through walls for you. Sam’s employees are more likely to rent a fourth-floor penthouse so they can see what’s on the other side of the wall. But Sam was determined to find a way.

“I think I need a bonus incentive program, D.F.,” he said. “What do you think of that idea?”

Oh no. When Sam asks you a question, he means, “You agree with me, right?”

“Well Sam, a bonus system. You know, that is a way to go. I’ve heard some ideas in my day, and that’s one of them.”

There are two major problems with bonus systems. One is that you can never anticipate when designing your bonus system what you might need a given employee to do on a given day. Let’s say a given employee’s job description does not generally involve the setting up of chairs. But on this particular Tuesday, the setting up of 300 chairs will make or break the company. The bonus-obsessed employee wants no part of the chairs. His bonus is based on cardboard cutting. If he saves the company but cuts no cardboard, his bonus check will be paltry!

The second problem with bonus systems is that they try to do what can’t be done, which is to take employees who are not naturally self-motivated and somehow light a fire under them.

“People will do what’s in their best interests!” Sam insists. “If there’s money in it, they’ll work hard for it!”

It seems to me that people will do what’s in their nature. While they might momentarily respond to incentives, they will always return to the work habits that come naturally to them – unless they undergo some life-changing transformation, which does happen, but not usually because someone offers to throw an extra C-note into your paycheck this week.

But don’t try telling that to Sam.

“I’m going to develop a bonus incentive system that rewards people for doing what the agency needs, D.F. You wait and see.”

Three days later, Sam unveiled his masterpiece:

“If your billable hours are more than 70 percent of your total hours, you receive a 20 percent bonus based on your salary, with a 5 percent boost if you also sold the work that resulted in the increased billings, minus 1 percent for every hour-equivalent of slippage, with an additional 2 percent subtracted if you fail to bill the entire budgeted amount.”

The employees’ eyes glazed over. A few thought of some things that are easier to understand, like the NFL’s passer rating system, with its “perfect” score of 158.3. One employee, who apparently managed to follow the whole thing, asked a question:

“Sam, are you saying we get docked if we finish a project under budget?”

“Well,” Sam said, “if you’re under budget, we don’t make as much money.”

“Yeah, but when we’re under budget, it makes the clients happy, and isn’t that how we keep them?”

Sam thought about that for a second, and then gave the only possible response.

“Are there any other questions?”

Each employee took his or her copy and shuffled back to his or her office. Sam went back to his office to wait for the incredible increase in energy that would surely begin to characterize each employee’s work habits.

I went back to my own company, to wait for human nature to be neutralized and for love and understanding to transcend all meaning, which will surely happen before Sam’s employees start acting the way he wants them to.

Poor guy. I did suggest to him once that he start trying to hire people who work hard just because it’s part of their fundamental makeup – without needing to get a bonus check for it.

“Why would they do that?” he said.

Oh. No reason. Good luck paying out those bonuses, Sam.

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