Following my rant of CTC and how passionately I despise the term and the concept, I would be remiss if I didn’t express how I feel about “performance bonuses.” The component is one of the most highlighted and inaccurate figures in your compensation and benefits package.
In almost all cases, performance bonuses are listed as a percentage of an individual’s salary (roughly between 10 and 25%) paid out every month, quarter, or six months. The HR department never fails to mention that the final figure is subject to business and individual performance in parenthesis. And interestingly, the final figure that people receive as a bonus is almost always a fraction of what’s promised.
Reason? The business wasn’t doing well, or the individual’s performance wasn’t up to the mark. Or both. But how is it that the company never does well and keeps onboarding new people every month? And what performance parameters are we talking about? Was there anything listed in the initial document that proudly highlighted the performance bonus figures? Nope. Was there any mention of the performance parameters one needs to fulfil to qualify for the bonus? Nope.
Don’t you think something’s missing here? I think both employers and employees are better off with clarity on performance parameters. The alternative is to stop highlighting these false figures in the compensation and benefits package. It’s not helping organisations build trust, nor is it assisting employees in understanding how the management will measure their performance.
Clarity brings confidence. Particularly when it comes to employee performance and how it relates to compensation and benefits at large. The onus is on to the HR department to facilitate discussions with the teams to clarify the performance parameters within an employee’s first 30 days. Having these conversations helps the employee and team understand what’s the most valuable metric for the management and how their contribution will move the needle. The best part is that they will get rewarded for the efforts they put in.
Compare that to an unscheduled meeting with a team member when the manager pushes the quarterly or half-yearly performance appraisal letter across the table. They stare at the numbers and notice that the numbers are way lower than what they’d initially seen in the offer letter. And then, the managers tell them all about their expectations and how this employee failed to meet them.
Weird, right? Yet, that’s what’s common among all managers. They think that’s what they’re supposed to do. But they will be utterly stupid to keep doing this as high-performance has a price and criteria attached to it. The latter being absolute clarity on what’s expected, how best to achieve it, and by when. Lack thereof is a recipe for either a disaster or mediocre teams with below-average performance.
They say, “you will miss all the shots you don’t take.” By not defining and sharing the performance parameters, leaders and managers rob their people of an excellent opportunity to deliver a higher level of performance.
Do you or your team members know what they’re aiming for this quarter? If yes, would you know how exactly your or your team’s performance affects your bonuses?
PS While I’m not a “money” person, I do hate the practice of listing BS numbers in the compensation and benefits package. And almost in all cases, no roadmap is given to the employee as to how they can earn that bonus. They’re just led into the whirlwind of the day-to-day activities and get sucked into it. And then they show up at the performance appraisal meetings thoroughly unprepared for what’s to come their way — peanuts (that too the un-roasted and un-salted ones).