Bonuses

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     from personal experience starting up and running small businesses--been there, done that.

     Giving out bonuses is a way to reward superior performance. There are ways to jiggle the process to better advantage both employee and employer.

     Example: A company with about 30 employees regularly handed out end-of-the-year bonuses. A pot of money was set aside, then divided among employees whose performance had been exemplary for the year. The owner decided to try another method--shortening the period. Using the same amount of money, he divided it into four pots. At the end of each quarter, he handed out bonuses to employees showing the performance most valuable to the company. By giving out bonuses four times each year instead on only once, the effects were better. It put the reward closer to the performance deserving the bonus. Employees got a little extra motivation four times a year instead of once.

     Example: Still looking at the situation, the same owner decided to try another variation. Using the same pot of bonus money, he divided it up into $100 bonuses. Whenever an employee showed exemplary performance or made a significant suggestion to improve the company, the owner called everyone together and presented the $100 bonus. This variation caused considerable increase in enthusiasm among employees. It kept the bonus very close to the performance that earned it. At the end of the year, the owner still gave out small bonuses--gift cards in small amounts. Although this experimenting took several years, the owner arrived at a bonus system that worked well.

     If you give bonuses to employees in your company, you might want to get creative in structuring the way you do it. What works in one place might--or might not--work in the next. But it's food for thought.

     My experience covers a lifetime of founding, growing and worrying with my own businesses, as well as helping other business owners with the problems we all face. I spend my retirement days writing about what I've learned--and learning new things every day. Remember: If you are not learning something, you're wasting your time.