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Giving out bonuses to employees is a tried and true way to reward superior performance. Bonuses motivate employees. The return to the company is greater than the bonus given.
But in small businesses, there are ways to jiggle the process to improve the effect.
Example: A company with about 30 employees regularly handed out bonuses at the end of each year. A pot of money was set aside, then divided among employees whose performance had been exemplary during 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 performance most valuable to the company. By giving out bonuses four times each year instead of once, the effects were better. It put the reward closer to the performance deserving the bonus. Employees got motivated four times each 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 operations, 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 place over several years, the owner arrived at a bonus system that worked well.
If you give out 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.
With bonuses, you are motivating employees to greater interest, motivation, and performance. And you are spurring your employees to focus their attention on a better future for the company.
Your business does not work very well under a cloud of uncertainty. When federal and state regulations come fast and furious, business tends to hunker down. The same is true of employees. So, don't make frequent changes in a bonus system. Employees like certainty, too.