Bonus Schemes: The Gift That Keeps On Taking

At the time of writing, nobody here is on bonuses, and I have absolutely no intention of ever resurrecting them.

Why? Because I tried it once, and it was hands down the most divisive, demoralising, administratively exhausting thing I have ever inflicted on a team.

On paper, it was perfect. Clear metrics. Measurable targets. Achievable outcomes. All the HR buzzwords ticked. We even sweetened the deal: extra cash for performance and an additional day's holiday every quarter. I thought I was being enlightened. Progressive. Generous.

Reader, I was wrong.

When a reward becomes an insult

Without exception, anything short of the maximum bonus was treated not as a reward but as a personal insult. The full bonus quickly became the baseline expectation, so anything less wasn't motivating at all. It was a disappointment and a grudge. Miss it by a whisker? Cue resentment and forensic level analysis of why the numbers were "wrong".

Now, maybe in a profession where the KPIs are absolutely cast iron and not open to any debate, this could work. But in a service business, staffed with intelligent engineering types, it's like arguing in a court of law.

From the dev team: "Yes, I might not have got that app onto the app store as promised, but that was because you distracted me with something else."

From the helpdesk: "Yes, my ticket resolution stats are a bit under target, but that's because I've been helping the new recruit. Also I was out on the road for a few days. Also I had some really hard, exceptional issues to deal with." And so on.

From operations: "Yes, there have been complaints about delayed orders, but that's all your fault because I'm just too busy."

And so it goes.

The stats are always wrong

The numbers were always disputed. Or at least debatable enough to be branded unfair. There was always a reason. A caveat. A "well, actually".

And here's the thing: even when the calculations were right, it didn't matter. Once someone believes they've been short changed, no spreadsheet on earth will talk them round. You end up spending hours defending a system that was supposed to save you conversations, not create them. The admin alone was a job in itself, and every quarter it kicked off all over again.

The core problem is this: people don't hear positive feedback at anything like the volume they hear negative feedback. You can shout "great job" through a megaphone, but whisper "you missed the bonus" and that's the bit that echoes for months. (More on this when we get to performance appraisals, where exactly the same dynamic plays out.)

So a scheme designed to motivate ended up doing the precise opposite. The people who hit maximum bonus felt they'd merely got what they were owed. The people who missed it, by however small a margin, felt hard done by. Nobody, at any point, felt rewarded. And the extra holiday day, which I genuinely thought would be the crowd pleaser, got swept up in the same resentment. When the whole package is contested, every part of it is contested.

The one exception

I think the only area where I would reintroduce bonuses is sales. Salesy types thrive on money related pay. That's a thing, and it's their thing. Commission and targets are baked into how that world works, and the people drawn to it tend to be motivated by exactly that. Anywhere else in the business? Never again.

Where I've landed

Honestly, I struggle to see how bonus related pay can be structured as anything other than a massive pain in the arse. Personally, I'd avoid it entirely. Pay people fairly in the first place, be straight with them about how the business is doing, and save yourself the quarterly courtroom drama.

That said, your mileage may vary. If you've cracked it, fantastic. Genuinely, I'd love to hear how. But approach any bonus scheme with a very large slice of caution, because in my experience the only guaranteed bonus is a bonus headache.